Brussels, 06/03/2009 (Agence Europe) - The Ecofin Council of 10 March will agree on “terms of reference” ahead of the meeting of finance ministers and governors of central banks, which will take place on 14 March to prepare for the summit in London on 2 April. This suggests a joint European position, the main thrust of which was already set by the European members of the G20 at their meeting in Berlin at the end of February (see EUROPE 9846). According to the document picking up member states' messages for the G20 ministerial meeting, the EU notes the need for comprehensive solutions and for all forms of protectionism to be avoided.
There are four priorities in international coordination of macroeconomic policies, namely restoring a properly functioning credit makret and facilitating lending in the real economy (timely and coordinated implementation of bank recapitalisation and guarantee measures and dealing with toxic assets is required); keeping markets open (competitive currency devaluations must be avoided); a multilateral trade finance initative ; and continuing internatioanl coordination of budget measures (which have to be reverisble).
The EU should do all in its power to ensure all financail marekts, products and actors are regulated or subject to surveillance, argues the ECOFIN Council. It sets out various measures in this connection like regulating all financial institutions (including hedge funds and investment funds) posing systemic risks or having access to public bailout schemes; forcing banks to set aside adequate reserves in times of growth for use in times of crisis; and monitoring the work of credit ratings agencies. A refrm of internatioanl accounting rules, particulary the notion of fair value, appears to be cruical, as is the drawing up of prinicpels on bonuses and executive pay to avoid eencouraging excessive risk-taking. On the management of financial crises, measures shoudl be stepped up to ensure as much of the cost as possible is borne by the private sector. Public intervention mechanisms should be impvoemed.
The minsiters want improvements to be made in internatioal coopration to combat tax evasion, financial crimes, money-laundering and the funding of terrorism. The financial system should be proptected against secretive, non-cooeprative and badly regulated jurisdictions, including offshore centers, explain the ministers, calling for the drawing up of a list of such jurisdictions and a penalty system that could, for example, prevent the sale of financial products from the countries in queston and restrict business transactions to or from the countries. The minsiers bac, the idea of the IMF and the Financial Stabiltiy Forum working clsoely together to draw up an early wanring system for risks inherent in the financial system. Coleges of supervisors should be set up before the end of 2009 for all cross-border financial institutions, they add.
The rôle of the IMF should be extneded. EU Member States back the idea of incraesing the IMF's resrouces and are prepared to contribute to a temporary rise, if necessary. Additional resources should be mobilisd through new agrreemetns to borrow (NABs), but raising quotas is not seen as a viable solution ; the IMF shoudl play a key role in averting crisis (greater heed shoudld be paid to its recommendations) and monitoring the financial sector; and IMF instruments and govenrnace shoudl be reformd (although this is not the most urgent questino).
The three priorities for multilateral development banks are deicding on the limits of their responsibilitis and cooepration iwth the IMF; ensring sufficeint captial and sufficnetly flexilbe funding mechanisms (World Bank resouces seem to be suffiicnet but the EU calls for improved World Bank governance); and they should provide greater support for the private sector. (M.B./A.B. trans fl)