EU Preparing a United Front in Advance of G20 Meeting
The G20 meeting is fast approaching and has become the single most important focal point for the global efforts to tackle the financial crisis.
The EU has sought to develop a common program for the G20 and to hammer out the main differences between diverging European interests. While nothing should be taken for granted, it seems plausible that the EU States will be singing from a common hymn sheet in London and that they will be defending a joint set of proposals. Their purpose appears to be to advance the cause of global regulation of financial markets.
The EU framework appears to be following the template laid out in the de Larosiere Report, to which we referred in last week’s international update. Following its publication—including 31 proposals providing a comprehensive set of concrete solutions for regulatory, supervisory and global repair action—the EU Commission reaffirmed that:
“the crisis has exposed unacceptable risks in the current governance of international and European financial markets which have proved real and systemic in times of serious turbulence . . . Market surveillance and enforcement of contractual and commercial practices will play an important role in restoring consumer confidence in retail banking.“
The Commission will later this year propose its reform program of the European financial system. The proposed reforms will ensure that all relevant actors and all types of financial instruments are subject to appropriate regulation and oversight. It is “grounded in the values of responsibility, integrity, transparency and consistency.”
The emerging EU position recognizes that in addition to steps required to address the regulatory lapses that may have contributed to the current crisis it is important to take additional steps that will build trust and confidence in the financial markets.
EU finance ministers, meeting on 10 March, indicated that they would continue to focus on regulatory reform and that coordination of fiscal stimulus measures would not be a focus for them.
This position puts the EU leadership in a potential conflict with the emerging position of the Obama Administration as they prepare for the G20 session. The US Treasury department continues to work on financial regulatory reform measures but has recently signaled that only broad principles will be available in the near future indicating they may not be ready to engage on a level of detail such as that of the de Larosiere report. Rather, it appears the Obama Administration will come to the G20 meeting with a more urgent focus on the need for stimulus measures. From the US perspective, this could be viewed as putting their best foot forward, in that the US has already enacted an expansive stimulus program.
While we expect the G20 will work hard to produce a strong communiqué from the sessions, the maneuvering required to get there will put important issues on the table between now and then.
