November 8, 2008 / 4:42 AM / 11 years ago

EU vows big reform push at Washington G20 meeting

BRUSSELS (Reuters) - President Nicolas Sarkozy vowed on Friday that Europe would head to a world summit in Washington next week united behind a French-inspired agenda for revamping the global financial system.

Sarkozy played down long-standing differences with other European partners over economic policy that bubbled over at a meeting of the 27-nation bloc in Brussels, notably insisting that he and Germany’s Angela Merkel saw eye-to-eye on how to deal with the worst financial shock since the Great Depression.

“All countries agreed on this need. All have agreed on the need to take firm and ambitious operational decisions at the Washington summit,” Sarkozy, whose country currently holds the floating EU presidency, told a closing news conference.

“We want to change the rules of the game in the financial world,” he added, stating that EU leaders backed a five-point French plan including a stronger role for the International Monetary Fund (IMF), surveillance of credit ratings agencies and caps on excessive risk-taking.

The plan calls for November 15’s meeting in Washington to lay the ground for concrete proposals, which would be reviewed within 100 days by a second summit. U.S. officials have been markedly more circumspect about the timeframe of any action.

“We can’t wait around for years until the crisis is over. We need to draw our conclusions quickly,” Merkel told a separate news conference.

British Prime Minister Gordon Brown, who like Sarkozy has called for an overhaul of the bodies such as the IMF that were created in the wake of World War Two, insisted that governments must now follow up on a round of interest rate cuts this week.

“This is the wrong time for short-term cuts in investment in public services,” he told reporters.

“There is now an emerging consensus that across the developed world it is right that fiscal policy should work in tandem with monetary policy to support economic growth.”

POLICY COORDINATION

France is eager for Europe to make its voice heard on the international stage, believing the financial crisis, which began in U.S. markets, has weakened the United States and provided the EU with an opportunity to boost its influence.

EU leaders will go to Washington buoyed by the belief that it was their 2.2 trillion euro ($2.8 trillion) round of bank rescues last month that helped avert financial meltdown sparked by a credit crunch coming from the United States.

“This is a global crisis and we have to remember where it started,” said Sarkozy, who called on U.S. President-elect Barack Obama to help reshape world economic governance.

“The time when we had a single currency (the dollar), one line to be followed, that era is over and it came to an end on September 18 when responsibility was taken without our opinion being asked with the failure of a major banking institution (Lehman Brothers), and the consequences all follow from that,” he said.

Earlier France’s European Affairs Minister Jean-Pierre Jouyet provided a reminder of a long-standing rift between Paris and Berlin by criticizing Germany for this week having vetoed a French call for a coordinated response.

“I think public opinion around Europe expects coordination and unity ... National and disorderly attitudes are not a good solution,” Jouyet told French radio before the summit.

Germany has long opposed a French idea for an “economic government” of Europe, suspecting it would undermine the independence of the European Central Bank (ECB) and that it is a Trojan horse for a French grab for power.

Merkel — whose country launched its national stimulus package this week — said she believed economic policy initiatives should be coordinated at EU level.

“You can call that economic government if you want. The point is that it covers all 27 member states,” she said in a pointed reference to French-backed ideas to coordinate the economies of the 15 participants in the euro currency.

Sweden had raised concerns that the French proposals for revamping the global financial system amounted to over-regulation. But a Swedish official said Stockholm dropped its objections after Paris deleted a reference to more wide-ranging proposals contained in an earlier draft.

Additional reporting by Frank Prenesti, David Brunnstrom, Marcin Grajewski, Pete Harrison; Writing by Mark John; editing by Crispian Balmer and Jon Boyle

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