Leaders of the United Kingdom, France, Germany and Italy plus the European Commission meet in London Tuesday to discuss how to respond to recent turmoil on global financial markets and greater calls for banking transparency.
Prime Minister Gordon Brown will host French President Nicolas Sarkozy, German Chancellor Angela Merkel and Romano Prodi, who, after resigning as Italy's prime minister last week, will be on one of his last official trips. EU executive branch President Jose Manuel Barroso will also join them. On the agenda will be issues including the role of banks in the world economy and calls for greater transparency in the wake of the instability triggered by the crisis in the U.S. subprime mortgage market. Two recent incidents have brought the situation into sharper focus in Europe: the massive losses caused by a rogue trader at French bank Societe Generale unveiled last week, the problems of U.K. lender Northern Rock PLC and other European banks hit by the US sub prime crisis, the latest of which Fortis from Belgium that anticipated losses of over a billion US dollars. Societe Generale junior trader Jerome Kerviel allegedly made over 70 billion Euros in unauthorized trading causing the bank losses of 4.9 billion Euros in losses, the worst losses on the European markets since September 11, 2001. Market analysts believe Societe Generale is now ready for a takeover bid. Northern Rock had to be bailed out by the Bank of England last year after a run triggered by the global credit crunch. Some 26 billion pounds worth of public money is propping up the bank, and the decision to give such support could come back to haunt Brown if a plan to keep the bank in the private sector announced last week does not work out. All leaders involved in the meeting also geared to bring calm to markets seem to agree that more transparency is needed to help prevent similar crises in future. In an article for the Financial Times newspaper last week, Brown argued that the source of many of the current problems was "a deficit of transparency". "That transparency deficit needs to be addressed - from within organizations, their auditors, the credit rating agencies and through regulatory requirements," he added. Sarkozy echoed that call on an official visit to India Sunday, saying the financial system had "lost sight of its purpose", denouncing operations which can produce "gigantic profits" as well as "gigantic losses" in a few hours. Barroso also urged the 27-nation EU to "reinforce the transparency of financial markets" in Sunday's edition of German newspaper Bild. And Germany circulated a paper about greater transparency at the EU summit in Lisbon last October, the proposals of which will be discussed at the London meeting, chief government spokesman Ulrich Wilhelm said last week. But there is disagreement in other areas with France and Italy calling for banks to be supervised on a European level and tighter controls of credit rating agencies, while the U.K. and Germany want a more flexible approach. The idea of an increased role for the International Monetary Fund in providing an early warning system should, though, be broadly popular