Business | Economy
Europe's 'Big 4' to plan global economic strategy
Stung by another bank scandal, the leaders of Germany, Britain, France and Italy meet in London on Tuesday under pressure to prove they have the will and the wherewithal to keep the economy on the rails.
- Reuters
- Published: 22:30 January 26, 2008
Paris: Stung by another bank scandal, the leaders of Germany, Britain, France and Italy meet in London on Tuesday under pressure to prove they have the will and the wherewithal to keep the economy on the rails.
They are also expected to discuss global economic strategy ahead of a meeting of the G7 industrial powers, where the four confer with Japan, Canada and the US and now have to consider what happens if there is US recession.
The summit, called by Britain's Gordon Brown a few weeks ago to discuss the global crunch, looked all the more necessary last week as world stock markets haemorrhaged and French bank Societe Generale announced the biggest rogue trading loss in history.
The event risks proving bigger on words than deeds, however, given that Britain differs with the other countries at the table on concrete steps to coordinate policing of financial markets at international level, government officials admit in private.
Brown laid out the stakes on Friday with a call for greater clarity in the increasingly sophisticated products the financial markets create and sell.
"We've got to ensure that there is more transparency so that people know what's out there," he said.
The credit crunch blew into something much bigger when banks and others in the financial markets panicked over their potential exposure via other investments where some of that debt had been parked, less visibly.
Big banks have since announced over $75 billion in losses and write-downs, and central banks have had to pump tens of billions of dollars in emergency loans into money markets to prevent the wheels of capitalist finance from seizing up.
French President Nicolas Sarkozy is as keen as Brown to be seen to be doing something.
"I will be in London beside Gordon Brown and Angela Merkel to make a certain number of proposals which will ensure this transparency and the morality of financial capitalism," he said.
All four leaders have reason to be seen to act.
Brown's government is still picking up the pieces after the country's first "run on a bank" in well over 100 years, sparked when mortgage lender Northern Rock turned to the government for help, saying the credit crunch had starved it of funding.
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