At a special meeting held yesterday in Berlin, the European leaders of the G-20 met to prepare for the upcoming G-20 Summit in April in London, which will be a follow-up to the G-20 Summit held in Washington last November. The purpose of the Berlin meeting was to address “some recommendations that may become the foundations of a common procedure to combat the financial crisis: in particular a stricter supervision of the International Monetary Fund, more thorough regulation of the financial markets, including the ‘tax havens,’ and unification of procedures for international rating agencies.” German Chancellor Angela Merkel, who chaired the meeting in Berlin released a summary outlining the following recommendations to be addressed at the London Summit:
- Implementation of measures intended to mitigate “the pro-cyclical effects of regulatory measures in order to constrain the amplifying impact of financial market fluctuations on the real economy” and promote “systemic stability in the global financial markets.”
- Adoption of sanctions against tax havens and uncooperative jurisdictions that do not presently exchange information regarding “tax evasion with other supervisors or authorities.”
- Development “of an effective early warning system” in conjunction with the IMF and the Financial Stability Forum (FSF).
- Adoption of sound transparent “principles on compensation practices to prevent bonus payments that contribute to excessive risk-taking.”
The EU leaders also intend to “support discussions on a new charter for sustainable economic activity” at a global level in order to create a stronger framework for financial stability at the government and intergovernmental level. In specific response to the G-7 ministers’ proposal introduced last week seeking to “increase the resources available to the IMF to help support countries hurt by the crisis,” the EU leaders will advocate in London for “doubling the funds available to the IMF” from $250 billion to $500 billion.
The EU leaders also emphasized that, despite government and central banks efforts to stabilize the financial markets, short-term crisis measures must to address present distortions in competition. The EU leaders committed to implementing stimulus measures “in a manner that limits distortions to competition to an absolute minimum.”
Following the meeting British Prime Minister Gordon Brown “called for a ‘global new deal’ to aid the recovery of the world economy and provide a set of principles for a sound future.” He further noted that “[t]he ‘grand bargain’ would involve global economic and fiscal stimulus, global financial control mechanisms and be based on sound banking principles.”
Representatives of the G-20 countries will next meet on March 1 in Brussels.