By Jennifer M. Freedman and Jonathan Stearns
Oct. 25 (Bloomberg) -- Asian and European Union leaders called for an overhaul of global banking rules that date back to World War II, lending support to French President Nicolas Sarkozy as he presses the U.S. to join a worldwide effort to resolve the financial crisis.
The heads of state and government ``pledged to undertake effective and comprehensive reform of the international monetary and financial systems,'' according to a statement released at a two-day meeting in Beijing. Chinese President Hu Jintao, Japanese Prime Minister Taro Aso, German Chancellor Angela Merkel and Sarkozy are among the more than 40 Asian and European leaders participating.
The summit, which ends today, is the first gathering of Asian and EU leaders since calls for coordinated action mounted along with bank failures and plunging stock prices that began last month. The U.S. will host the Group of 20 industrialized and developing nations on Nov. 15 at Sarkozy's urging.
South Korea said it ``highly valued'' Sarkozy's ``strong leadership.'' The French leader has compared the effort to the 1944 Bretton Woods conference in New Hampshire that fixed exchange rates, hitched the world to the gold standard and created the International Monetary Fund and World Bank.
The EU has floated the ideas of including more bank supervision, stricter regulation of hedge funds, new rules for credit-rating companies and changes at the IMF.
`Falling Behind'
``The IMF, World Bank and other agencies are falling behind the times,'' said Jeon Hyochan, a researcher at Samsung Economic Research Institute in Seoul. ``The agencies need to strengthen their ability to take pre-emptive measures.''
The Washington-based IMF is considering an emergency program to prevent a collapse of emerging markets by almost doubling borrowing limits for members and waiving its standard demands for economic austerity measures. The agency agreed yesterday to lend Iceland $2.1 billion in accordance with existing rules after the island nation's banking system collapsed, threatening a prolonged economic contraction.
``There is a unanimous consensus to push forward reform,'' said Kazuo Kodama, a spokesman at Japan's Ministry of Foreign Affairs. No agreement has been reached on the details of that reform, he said.
`Excessively Stringent'
Japan wants the IMF to be able to act in a ``nimble, speedy, timely manner'' and ``without excessively stringent conditions'' when helping poorer nations, said Osamu Sakashita, a spokesman for the prime minister's office.
The EU and Asian leaders were less specific in their statement, which says the ``IMF should play a critical role in assisting countries seriously affected by the crisis.''
Sarkozy's campaign for an overhaul threatens to expose differences with the U.S. over global financial governance. That may provoke tensions and bog down talks while individual countries continue to act on their own to limit the fallout.
South Korea stressed the importance of unity in taking any actions. ``If Europe and the U.S. become united, it would enhance whatever countermeasures are taken,'' South Korean President Lee Myung Bak said today, according to his spokesman, Lee Dong Kwan.
The credit crisis is choking off funds to companies and people, undermining business and consumer sentiment. Economists at Deutsche Bank AG expect the Group of Seven economies to contract 1.1 percent next year, the worst since the Great Depression, and global growth to be the weakest since the 1980s.
Markets Tumble
Stock markets around the world have tumbled this year amid growing concern that governments, central banks and finance ministers are powerless to counter eroding corporate earnings and job losses.
More than $10 trillion has been erased from the market value of equities so far this month, accounting for about one- third of the total value wiped off stocks this year. MSCI's index of developed and emerging stock markets plunged 48 percent in 2008 and is heading for its worst year on record as credit- related losses topped $660 billion.
The Standard & Poor's 500 index is down more than 40 percent this year, poised for its worst annual retreat since 1931. The S&P 500 has lost 26 percent since U.S. investment bank Lehman Brothers Holdings Inc. declared bankruptcy on Sept. 15, while the U.K.'s FTSE 100 has fallen 25 percent, Japan's Nikkei 225 has tumbled 37 percent and Germany's DAX has dropped 29 percent.
To contact the reporters on this story: Jennifer M. Freedman in Beijing at jfreedman@bloomberg.net; Jonathan Stearns in Beijing at jstearns2@bloomberg.net
Posts
No comments:
Post a Comment