EUROZONE

World financial turmoil summit

Tuesday, January 29, 2008

British Prime Minister Gordon Brown is paying host to French President Nicolas Sarkozy, German Chancellor Angela Merkel, Italy's crisis-hit premier Romano Prodi and the head of the EU Commission to discuss the world financial crises.

  
Key European leaders headed for London Tuesday to discuss how to respond to recent global financial turmoil, hoping to reassure markets that Europe's economy can stay on an even keel.
  
British Prime Minister Gordon Brown was to pay host to French President Nicolas Sarkozy, German Chancellor Angela Merkel, Italy's crisis-hit premier Romano Prodi and the head of the EU Commission from late afternoon.
  
Hours before the talks, European Commission chief Jose Manuel Barroso admitted that the European Union's economy is "not completely immune" to a US downturn, but insisted "nobody is speaking about a recession in Europe."
  
"Yes there is turbulence in the financial markets," he said in Brussels, but "there is no need to rush for the life boats".
  
A joint press conference was scheduled Tuesday evening, when they were expected to agree that while the "fundamentals" of the European economy remain sound, institutional reform is needed to counter the effects of global crises.
  
"The purpose of this evening's meeting is for the leaders of the European members of the G8 to come together collectively, primarily to discuss economic and financial issues," Brown's spokesman said.
  
"There will be a number of specific issues they will be discussing, such as transparency of banks' balance sheets, cross-border co-operation to deal with financial crises, the role of credit ratings agencies and so on."
  
A meeting of finance ministers from the world's eight most industrialised nations next month is expected to take forward any specific proposals before the G8 meets in Japan in July, he added.
  
The talks come amid the continuing fall-out from the crisis on the US sub-prime mortgage sector last year that saw a squeeze on the global credit markets.
  
The market turmoil -- which triggered an emergency 75 point rate cut by the US Fed last week -- has been compounded by a rogue trader scandal at France's Societe Generale bank and the near collapse of Britain's Northern Rock.
  
On Tuesday stock markets in Asia and Europe rallied after an overnight rebound on Wall Street, recovering some of their recent heavy losses as investors pinned their hopes on another US interest rate cut, dealers said.
  
Brown will also be looking to gain support for his plans to reform global institutions like the IMF and the World Bank, which he believe are now ill-suited to the modern, globalised world.
  
He said in a speech in India last Monday that the IMF should have an enhanced "surveillance" role, with the ability to assess and warn of potential economic crises.
  
British media suggested that Brown will also seek to use the meeting to demonstrate his commitment to Europe, after missing the formal signing with other leaders of the new EU treaty in Lisbon last month.
  
Britain's finance minister Alistair Darling rejected claims in the Financial Times that the talks could be "long on rhetoric and short on concrete outcomes, with disagreements among the leaders for the need for tighter regulation".
  
But there was concern in Italy and France about the implications for the EU as a whole about a mini-summit involving only the leaders of the 27-member bloc's four biggest economies.
  
Italy's business daily Il Sole 24 Ore said it could lead to a "multi-tier" EU with the major economies taking separate decisions.
  
And the head of France's Socialist Party, Francois Hollande, told Europe 1 radio: "You don't sort out such an important issue with just four people."
  
Instead, he called for a meeting of all Europe's finance ministers.
  

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