3 Apr 2009

Germany, France call for tighter financial regulation

6:06 am on 3 April 2009

France and Germany have insisted that the G20 summit agrees on measures to tighten financial regulation and crack down on tax havens.

Leaders from the G20, which groups the world's most powerful economies, are gathering in the British capital for a two-day summit to discuss ways to resolve the worst financial crisis since the 1930s.

French Finance Minister Christine Lagarde says her country is unwilling to compromise on its call for stricter financial regulation, warning that France will walk away from the table if concrete action is not agreed upon.

President Nicolas Sarkozy of France has threatened to disassociate himself from any "false compromises". German Chancellor Angela Merkel supported Mr Sarkozy's stance and said she would make sure concrete decisions were taken.

United States President Barack Obama played down differences with France and Germany, saying there was "enormous consensus" between the largest developed and emerging economies on plans to resolve the crisis.

Mr Obama said G20 nations were not going to agree on every point but pushed aside suggestions the summit would falter because countries were split over the importance of regulation versus new stimulus packages.

"The core notion that government has to take some steps to deal with a contracting global market place and that we should be promoting growth - that's not in dispute," he said.

"On the regulatory side, this notion that somehow there are those who are pushing for regulation and those who are resisting regulation is belied by the facts."

The stakes are high, with the world economy set to shrink this year for the first time since World War II and tens of millions of people losing their jobs.

People will die in the world's poorest countries if rich nations push them aside in the scramble to escape from the global economic crisis, Egypt's finance minister Youssef Boutros-Ghali said.

Mr Boutros-Ghali, who also heads the International Monetary Fund's policy committee, said developed countries are borrowing heavily on international markets to fire up their economies, meaning poorer countries are increasingly unable to do so.

Australian Prime Minister Kevin Rudd said world leaders must reach agreement for immediate action or the global economy will suffer the consequences by the end of the year.

Mr Rudd said a significant increase in funding for the IMF was needed to allow it to act to prevent vulnerable economies and their financial systems from going under.

Moral values needed - Brown

British Prime Minister Gordon Brown told a gathering of religious leaders that the financial system needs to be rebuilt on the moral values of hand work, honesty and fairness.

He says ordinary people are baffled about how some people have been allowed to grow wealthy by making failed bets with others' money.

The Pope has also called for a return to ethics in finance.

In a letter to Mr Brown, Pope Benedict said the measures proposed by the G20 must offer security to families and stability to workers.

The Pope also urged the leaders to maintain aid for poor countries - especially African ones - despite the economic crisis.