The heads of Europe’s biggest economies met yesterday 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 gathered in the German capital to hammer out a European stance to take to a summit of the G20 developed and major developing countries in London on April 2.
The Berlin meeting came 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 said 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 on 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 signaled 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 center could be undermined.
But British Prime Minister Gordon Brown said last week the world would see “unprecedented cooperation” over the next few months in addressing the financial crisis.
In a comment piece in The Observer yesterday, 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 said. “That has to be the foundation on which a new system must be based.”
He advocated a rejection of “short-term bonus culture,” stronger governance in banks and better national and international regulation.
US President Barack Obama’s US$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.