MercoPress. South Atlantic News Agency

EU leaders reach common position for Washington summit

The summit of European Union leaders in Brussels on Friday reached a common position on reforming the world financial system, announced French President Nicolas Sarkozy. EU countries agreed on “the need to take firm and ambitious operational decisions at the Washington summit” on 15 November, Mr Sarkozy told reporters

The Brussels talks were aimed at EU co-ordination ahead of the global summit on financial reform in Washington. The French president wants tighter financial regulation and a bigger IMF role. As current holder of the EU presidency he pushed for the G-20 Washington summit, arguing that the world's financial system required fundamental reform in the wake of the credit crunch. He said Friday's discussions covered areas such as financial transparency, curbing tax havens, the activities of credit ratings agencies and "this short-term craze which is basically speculation". European governments have already committed 2.8 trillion US dollars to bank rescues to avert a financial meltdown, amid a banking crisis widely held to be the worst since the 1929 Wall Street crash. The Washington summit "must not just be a meeting where people exchange views, analyse causes? we must come up with reactions and answers to the financial crisis," Mr Sarkozy said. He believes no financial institution, market segment or territory should escape supervision, including hedge funds. He also wants codes of conduct to avoid huge bonuses for bankers and excessive risk-taking in the financial industry. But Britain and Sweden have warned that excessive regulation may stifle the financial market, while Germany is getting increasingly irritated by what it sees as France's attempts to run everything. Mr Sarkozy has called for concrete reforms to be worked out fast - within 100 days after the Washington summit, our correspondent says. That timescale could mean US President-elect Barack Obama would be involved in the proposed reforms. Mr Sarkozy admitted that Friday's talks had been "pretty intense", with some divergences of opinion on the priorities, but he insisted that all the leaders "are convinced of the need to take economic initiatives now, following on from the financial initiatives". There was consensus on the need for a "different, entrepreneurial capitalism now," he said. Sarkozy sees the Washington summit as "a new Bretton Woods" - referring to the 1944 meeting which led to the creation of the International Monetary Fund and other global institutions. He also said he wanted Spain and the Netherlands to be included in the Washington summit. UK Prime Minister Gordon Brown told reporters on Friday that "we've got to get the banks resuming lending". He stressed that "the key to solving this problem is not wholly the action we can take nationally, but what we can do globally". European Commission president Jose Manuel Barroso said the European agenda "doesn't amount to interventionism". "We are not for interventionism, we are for a good performance of the markets, we are for the social economy of the markets. The EU leaders consensus worked out on five specific approaches for the November 15 summit in Washington: a) submit rating agencies to registration, surveillance and rules of governance; b) adopt the principle of convergence of accounting standards and review the application in the financial sector of the fair value rule in order to improve its consistency with prudential rules; c) decide that no market segment, no territory, and no financial institution should escape proportionate and adequate regulation or at least oversight; d) establish codes of conduct to avoid excessive risk-taking in the financial sector, including in the area of systems of remuneration. Supervisors will have to take them into account in evaluating the risk profile of financial institutions and e) give the IMF the initial responsibility of recommending the measures needed to restore confidence and stability. The IMF must be given the necessary resources and appropriate instruments to support countries in difficulty and must fully exercise its role of macroeconomic surveillance.