EU Moves Swiftly on Reform Agenda Following G20 Summit
The G20 meeting in Washington, DC did what it was supposed to do—it constituted the starting point for a process to re-model the global financial architecture unanimously supported by the attending nations. By expanding the group of countries present to 20, the organizers managed to include all leading and emerging economies in the process. This will no doubt become important during the ensuing efforts to achieve global legitimacy for the process.
The German Chancellor Angela Merkel after the meeting reported that, "Over the next 100 days the G20 states intend to take about 50 emergency measures…The action plan adopted in Washington contains important steps that should lead to a global economic order and thus ensure an international dimension of the social market economy."
These views, as expressed by the German leadership are broadly representative of the European view. On 17 November, the UK Prime Minister reported back to the House of Commons along similar lines, emphasizing that:
"...In Washington, we agreed, first, on fundamental reform of the way the financial system is supervised around the principles that Britain has been promoting—of transparency and accountability, responsibility, better banking practice, integrity, and international cooperation. Including: establishing international colleges of regulators; bringing transparency to tax havens by including them within the scope of the financial system; convergence of accounting standards; reviewing executive compensation schemes that encourage excessive and irresponsible risk-taking; disclosure of toxic assets; and reform of credit-rating agencies. We set a clear timetable, tasking our finance ministers to prepare immediate measures for implementation by March 31st and to report back on progress with the full action plan at the next meeting."
It is now clear that the G20 agenda has become an integral part of the EU’s policy objectives and that the EU (with its 27 Member States), as a result, may move faster and further with political and economic reforms than some of the other countries. Thus far, the EU countries have managed to maintain a surprisingly consistent common line, something that French President Sarkozy as head of the current EU Presidency repeated several times. The German and French governments will in November have their usual bi-annual and bilateral summit at which additional concrete steps for the EU and the G20 will be discussed, adding to the momentum that the Europeans would like to maintain.
The French Senate and General Assembly are widely supportive of new far-reaching regulation, as became clear through their common report in relation to the summit, which directly questioned self-regulation of financial markets and highlighted the absence of a strong European supervisory mechanism. Views like these are also gaining ground in Germany where leading politicians for the first time openly agree to discuss banking supervision at the EU level, a matter that until now has been largely a national matter. Of course, the Bush Administration in the United States was encouraged by summit participants’ commitment to free markets including open trade and investment. The Declaration of the Summit on Financial Markets included the following caution, "Recognizing the necessity to improve financial sector regulation, we must avoid over-regulation that would hamper economic growth growth and exacerbate the contraction of capital flows, including to developing countries."
The seven-page Declaration contains a number of principles and suggested actions. April is a long way off in terms of the current financial crisis. With a new U.S. president and unpredictable economic conditions, the next G20 meeting could go in a number of different directions. The coming months will be an interesting period to see what new alliances form in new areas of policy, including banking supervision.
