Europe seeks harmony for crisis summit

Agence France-Presse

Posted at Feb 22 2009 11:41 AM | Updated as of Feb 22 2009 07:41 PM

BERLIN - The heads of Europe's biggest economies meet Sunday to try and forge a common position on the global financial crisis despite simmering disagreements over the way forward.

The British, French, Italian, Spanish and Dutch leaders are gathering in the German capital to hammer out a European stance to take to a summit of the Group of 20 (G20) developed and major developing countries in London on April 2.

The Berlin meeting comes at the end of a week in which the economic crisis focused on central and eastern Europe, raising fears over the potential fallout among highly exposed banks in western Europe.

Squabbles over protectionism could also hinder efforts to present a united European front, with the European Commission voicing concern over proposed plans by France, Italy and Spain to shield their ailing auto sectors.

But French President Nicolas Sarkozy stressed he would not accept "a weak compromise, a cheap fix" in establishing the European position at the meeting hosted by German Chancellor Angela Merkel.

"The violence of the (economic) crisis, its depth, call for really profound changes. We have to start capitalism again from scratch, make it more moral... that is why I want to see a real response (in Berlin)," Sarkozy said.

Merkel too turned up the heat ahead of the meeting, calling Saturday for regulations and oversight of financial markets to be reinforced.

"There should be no more gaps" in international controls of financial products, the head of Europe's largest economy said in her weekly video message.

Germany is pushing to reinforce rules for hedge funds and better rating systems to avoid repeats of meltdowns in the future.

German officials have also signalled their determination to have "exit strategies" ready for when the crisis begins to abate.

European officials suspect Britain's resolve to tighten the regulation of markets may be waning, with London concerned that its position as Europe's preeminent financial centre could be undermined.

But Brown said this week the world would see "unprecedented cooperation" over the next few months in addressing the financial crisis.

He has already called for a world leaders to strike a "grand bargain" to help the recession-mired global economy.

British priorities for the April summit include kick-starting lending, renouncing protectionism, reforming global financial regulation and cracking down on tax havens, according to a preparatory report.

In a comment piece in The Observer newspaper on Sunday, Brown called for a "reformed and more responsible banking system."

"Banks must act in the long-term interests of their shareholders and therefore of the economy as a whole, not in the short-term interests of bankers," Brown wrote.

"That has to be the foundation on which a new system must be based."

Brown said that reformed banks in Britain would have to serve homeowners while promoting responsibility in the housing market, and better support British start-ups.

"We want to ensure that the new banking system that emerges over the coming years meets all those requirements -- and becomes the servant of our economy and society, never its master," he wrote.

US President Barack Obama's $787-billion stimulus plan to jump-start the US economy has also raised fears in some European quarters over protectionism.

In public, European leaders are poised to repeat a commitment to avoid resorting to protectionism as a response to the world financial crisis.

The European Union -- also a member of the G20 -- will be represented by European Commission President Jose Manuel Barroso.

European Central Bank President Jean-Claude Trichet and Mirek Topolanek, prime minister of the Czech Republic, which currently holds the rotating EU presidency, will also attend.