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Eurozone ministers discuss global capitalism, economic slowdown

Other News Materials 3 November 2008 18:58 (UTC +04:00)

Eurozone finance ministers Monday faced the unenviable double task of trying to lead efforts to reform global capitalism while seeking a fix for their troubled economies, reported dpa.

The evening meeting in Brussels was the first in a series designed to prepare a common European position ahead of global talks on the financial crisis taking place in Washington on November 15.

And it came amid gloomy new forecasts from the European Commission, which now expects the euro economy to teeter on the brink of recession in 2009.

"Recession is a real risk, for some countries, for the euro area, and for the European Union," said European Economic and Monetary Affairs Commissioner Joaquin Almunia in presenting the commission's forecasts.

The unfortunate prospects for the so-called "real" economy were expected to feature prominently in Monday's discussions, which were to be followed by a meeting extended to all of the EU's 27 finance ministers on Tuesday.

But Monday's talks were nevertheless expected to focus on a proposal by the French presidency of the EU to reorganize the international financial system so as to avoid a repeat of the current credit crunch.

At the Washington summit of the world's 20 leading economies, Europe is to be represented by three eurozone members - France, Germany and Italy - plus Britain.

The French set of proposals calls for a reform of the International Monetary Fund (IMF) and of the World Bank and for stricter controls on lenders, investment funds and credit rating agencies.

EU leaders also want to set up a credit crunch "early warning system", crack down on the world's tax havens and link bonuses paid out to company executives to long term objectives, rather than to short-term risk taking.

However, the prospects of success for a "a new Bretton Woods" - the name of the 1944 conference that created the present-day global financial architecture - are likely to be stifled by deep-rooted divisions within the EU.

Member states, for instance, have long been unable to reach an agreement on tighter rules for insurance companies.

And financial operators in the City of London are uneasy about French plans to harmonize and strengthen EU supervisory rules.

Reforming the IMF, meanwhile, sounds like a tall order in view of the fact that EU member states have so far been unwilling to give up their individual seats on its executive board in favour of a common European chair.

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