View Full Version : Economics EU calls for new economic order with lesser US focus

10-16-2008, 08:31 AM
EU Pushes for Overhaul of Postwar Financial System (Update1)


By James G. Neuger and Mark Deen

Oct. 16 (Bloomberg) -- European Union leaders pressed for an overhaul of the global financial system to prevent a repeat of the credit crunch that sparked the biggest stock-market selloff since the Great Depression.

EU leaders called for a global summit as soon as next month to rewrite the 1944 Bretton Woods accord that paved the way for Europe's post-World War II reconstruction and set up the institutions that oversee the world economy today.

``We had the emerging market crisis, we had the Internet bubble, now we have this massive crisis,'' French President Nicolas Sarkozy told reporters after chairing the first session of an EU summit late yesterday in Brussels. Europe insists on the ``re-foundation of the international financial system.''

The European initiative is likely to face resistance from the U.S., which has used its dominance of international financial institutions to promote a brand of capitalism that has come into at least temporary disrepute.

``The U.S. got what it wanted in 1944 and, I suspect, will do so again simply because the Europeans won't be able to decide what they want,'' said Martin Weale, director of the National Institute of Economic and Social Research in London.

The EU summit resumed this morning and is due to end at 1 p.m. Brussels time.

To be sure, no EU leader called for returning to fixed rates for currencies, the hallmark of the original Bretton Woods agreement. That dollar-based monetary system fell apart in the 1970s, giving way to today's freely floating currencies.

G-8 Meeting

President George W. Bush ``definitely'' favors holding a Group of Eight meeting before the end of the year, White House spokesman Tony Fratto said in Washington. European governments pressed for a wider summit, including leaders of developing economies such as China, India, Brazil and South Africa.

To jumpstart that process, Sarkozy, holder of the EU's six- month presidency, will travel with European Commission President Jose Barroso to the U.S. on Oct. 18 to meet Bush.

Separately, concern mounted that the banking crisis will drag down the broader European economy, where business and consumer sentiment had already slumped to the lowest level since the September 2001 terrorist attacks in the U.S.

``This financial crisis is starting to have an impact on consumers and companies,'' Barroso said.

Support Industry

Sarkozy, the summit chairman, drafted a statement in which the EU pledges ``to take the necessary steps to react to the slowdown in demand and the contraction in investment, and in particular to support European industry.'' It called on the commission -- which has no tax or budget powers -- to make proposals by the end of the year.

While stressing a global approach to regulation, European governments have yet to spell out what they want from the jumbo summit. It was unclear whether leading countries -- including Britain -- would give up their longstanding opposition to handing over business regulation to outside authorities.

Calls for a single financial supervisor in Europe continued to get little traction. Instead, the leaders agreed that bank supervisors from the 27 countries will meet once a month to share insights.

Proposals for stiffer regulation floated by EU leaders included more international supervision for cross-border banks, a global ``early warning'' system for crises, a revamp of the International Monetary Fund, tougher regulations on hedge funds, new rules for credit rating companies, limits on executive pay and punishments for excessive risk-taking.

Level Playing Field

EU leaders will set up a financial crisis taskforce to improve coordination among the bloc's 27 governments, and endorsed an easing of ``mark-to-market'' accounting to maintain a level playing field with the U.S.

That accounting standard, lampooned as ``absurd'' by Sarkozy, forced banks to alter the value of their securities holdings along with daily market fluctuations, exacerbating losses in times of market slumps.

U.K. Prime Minister Gordon Brown, author of the British bank-bailout plan that was copied across Europe and in the U.S., called for an end-of-year deadline to place each of the world's top 30 banks under the supervision of a panel of regulators from the countries where it is active.

``We now have global financial markets, but what we do not have is anything other than national and regional regulation and supervision,'' Brown said.

Tax Havens

Treatment of tax havens such as the Cayman Islands and Monaco may be overhauled as part of any new global financial framework, Sarkozy said.

``It will be part of discussions Saturday in Washington,'' the French leader said. ``Will we continue to work with tax havens? It's a valid question. We've passed into a new era. It's a question we'll put on the table and immediately.''

EU governments initially reacted to the crisis in a ``piecemeal and ad hoc'' fashion, ``creating an impression of disorder and sending confused signals to financial markets,'' aides to Barroso said in a paper prepared last week and released yesterday.

In the meantime, European leaders have committed as much as $2 trillion to guarantee interbank lending and buy stakes in banks, to prevent hobbled credit markets from tipping the broader economy into recession.

The U.S. followed suit, announcing an unprecedented $250 billion government investment in banks, starting with nine institutions deemed critical to the survival of the system.

Growing doubts that the bailout will keep the U.S. out of recession hammered U.S. stocks, leading to the steepest plunge since the crash of 1987.

``There needs to be a new Bretton Woods,'' Italian Prime Minister Silvio Berlusconi said. ``The consensus is very strong and it keeps growing stronger.''

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Mark Deen in Brussels at markdeen@bloomberg.net

10-16-2008, 09:11 AM
Well, no more IMF, World Bank, or WTO, ...yawn


10-16-2008, 09:19 AM
Looks like the One Worlders are just trying to exploit the credit crunch for a bigger power grab including closing up the last bastions of economic freedom like the Caymans.

10-16-2008, 10:19 AM
Looks like the One Worlders are just trying to exploit the credit crunch for a bigger power grab including closing up the last bastions of economic freedom like the Caymans.


Damn that's funny.

10-16-2008, 10:34 AM
I saw we call in our war debts with EU from WWII with interest.

10-16-2008, 11:03 AM
I saw we call in our war debts with EU from WWII with interest.


10-16-2008, 02:55 PM
I saw we call in our war debts with EU from WWII with interest.