Bharat Rakshak

2ndUPDATE:G20:France Sarkozy:New Fincl Rules 'Non-Negotiable'
By Gabriele Parussini and Nathalie Boschat
Of DOW JONES NEWSWIRES
http://online.wsj.com/article/BT-CO-200 ... 13446.html

LONDON (Dow Jones)--France and Germany raised the pressure a notch Wednesday, saying on the eve of the Group of 20 summit that the creation of a new architecture for the global financial system is "non-negotiable."

"We want the principles of a new financial regulation. It's non-negotiable", French President Nicolas Sarkozy said at a joint press conference with his German counterpart, Chancellor Angela Merkel. The German leader added that "this needs to be laid down in the communique."

Sarkozy and Merkel said that agreement needs to be reached and appear in writing in the final statement on the following issues: Countries that don't comply with international standards on taxation, supervision and money laundering; hedge fund registration; banker and trader pay; and tougher rules for credit rating agencies.

A person in the French delegation told Dow Jones Newswires after the press conference that the thorniest issues on the list, namely tax havens and banker compensation, are likely to be decided on at the head of state and government level.

France and Germany have presented a united front in the run-up to the summit in a bid to get through their tough regulatory agenda and reject other countries' calls for more economic stimulus.

Sarkozy said France and Germany have already done their bit as far as stimulus is concerned, stressing that both countries have put enough "fuel" in the economy. Merkel added that while both countries were ready to help poorer nations unable to put in place fiscal packages on their own pull out of the crisis, this wasn't intended as a "bargaining chip" to get their way on regulatory demands.

Asked whether he will leave the summit if its outcome doesn't satisfy French demands, Sarkozy softened his stance.

"I've just arrived - do you want me to leave?" he said.

French Finance Minister Christine Lagarde told the BBC on Tuesday that Sarkozy was prepared to leave the summit if "the deliverables" weren't there.

The two leaders looked determined on all fronts.

"We need to have a list of those non-cooperating with the rules," Merkel said.

France and Germany have been pushing hard for the G20 to adopt three separate lists of non cooperative centers: one drafted by the Organization for Economic Cooperation and Development listing countries which don't allow the exchange of information with other countries' fiscal authorities; one for countries involved in money laundering, and a third one for those breaching Financial Stability Forum rules on transparency and prudential requirements.

The move has been so far resisted by China in particular, which wants to preserve the looser financial regulation of Hong Kong and Macau.

"Every one will have to take a stand on fiscal havens. The question is whether a head of state can say that tax havens are acceptable. We don't think so," he said, adding there was no need for a "grand international summit to have a list" of non-cooperative centers.

On credit rating agencies, which have been blamed for being partly responsible for the financial crisis, Sarkozy said their lack of transparency is "a scandal," and called for measures to end their conflicts of interest.

The French president also recommended that securitization be "traceable," meaning that banks should keep on their balance sheets a certain amount of the securitized products they sell.

Both France and Germany are keen to get an agreement from the G20 summit to cap bankers' pay, amid rising anger from public opinions on the subject.

In France, uproar at top executives of some of the country's largest banks, who awarded themselves stock options while accepting state aid and cutting jobs, prompted the government to pass urgent legislation last week.

"Trader remuneration is a global problem," Sarkozy said. "If there's no global solution, that's going to put our countries at a disadvantage."

Raj wrote:Shyam,
The reason for IB4TL is that the thread starter, in is usual way, copied anurd pasted an article. He did not give any of his opinions, not even one line.

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Analysis: But will it work?

By MARTIN CRUTSINGER – 2 hours ago

WASHINGTON (AP) — Will it all work? World leaders achieved the minimum at their London summit, cobbling together more resources for the International Monetary Fund and pledging to better regulate unruly financial markets. But no country would budge from its bottom line, so the biggest goals were not met.

Global markets cheered anyway, happy that the Group of 20 leaders were able to demonstrate unity in the midst of the worst financial crisis in decades.

In the end, the ability of President Barack Obama and the other leaders to paper over their differences may turn out to be the biggest achievement of all.

Despite some tough talk going into the meetings, including a threatened walkout by French President Nicolas Sarkozy if things didn't go his way, the leaders emerged with a show of common purpose.

Their final communique even contained a pleasant surprise in the form of a tidy $1.1 trillion pledged to help make sure emerging economies like those in Eastern Europe and Latin America can tap into sufficient resources at the International Monetary Fund to withstand the current turbulence.

That pile of money was easier to obtain because it won't force the United States or other countries to increase their deficits to supply the additional resources to the IMF. Instead, much of the increased support will come in the form of loans the major countries will agree to provide to the IMF if the agency needs more firepower.

The leaders also pledged to fill in the current gaps in financial regulation that have been laid bare by the troubles that began in subprime mortgage lending in the United States but have now spread to other types of loans not only in the U.S. but around the world.

Obama stood firm against a determined push from Sarkozy and German President Angela Merkel for creation of a global regulator to attack what the Europeans see as a U.S. brand of unfettered capitalism that brought the global economy to its knees.

In the end the U.S. argument prevailed. Instead of the more powerful global regulator, the summit called for better coordination among individual country regulators and increased transparency to provide more oversight of the so-called shadow banking system of hedge funds and other lightly regulated financial entities.

The approach adopted by the G-20 closely follows the outlines of a regulatory overhaul that U.S. Treasury Secretary Timothy Geithner unveiled last week.

Many economists believe this approach offers the best chance of repairing the flaws in the current system quickly, avoiding a long, drawn-out fight over creation of an all-powerful global overseer.

"I think the fact that the G-20 did not go for a global regulator was the right decision," said Morris Goldstein, a former top official at the IMF and now an analyst with the Peterson Institute for International Economics in Washington. "The key agreement they did achieve was to declare that any systemically important institution, such as hedge funds, will be regulated."

The G-20 empowered a renamed and expanded Financial Stability Board — which will now include all the member countries in the G-20 — to provide guidance and expertise in the regulatory overhaul effort. This group, formerly called the Financial Stability Forum, was created after the 1997-98 Asian currency crisis to provide a way for countries to discuss financial regulatory issues.

The G-20 also pledged an immediate effort to crack down on offshore tax havens, a loophole in the current global regulatory system that costs the United States and other nations billions of dollars in lost tax revenue each year. These offshore finance centers are also the home for many hedge fund operations.

But that effort's success could depend heavily on whether the major economies can bring enough pressure on countries such as Monaco and the Grand Cayman Islands.

Obama and his colleagues made all the right pledges to fight political pressure at home to raise protectionist barriers to protect domestic industries. The G-20 made the same pledge at their first leaders' summit last November in Washington. But since that time, 17 of the nations at that meeting, including the United States, have moved to protect domestic industries in the current downturn.

Even with that failure of will, analysts said, the problems would be much worse if there wasn't a G-20 process at work to keep nations from pursing the disastrous policies that turned the stock market crash of 1929 into the Great Depression of the 1930s.

"The main benefit of the G-20 is that it demonstrates that world leaders are working together and have a high level of commitment to quelling the crisis," said Mark Zandi, chief economist at Moody's Economy.com.

"They have taken a lesson from the Great Depression when countries didn't work together and that caused the whole system to crumble," Zandi said. "No one wants to see that happen again."

EDITOR'S NOTE _ Martin Crutsinger has covered the economy for The Associated Press for 25 years.

http://www.independent.co.uk/news/world ... 61095.html


The ultra free market is no longer dogma

In saying as baldly as he did yesterday that "the Washington consensus is over", Gordon Brown effectively rejected, on behalf of the whole G20, the ultra free-market dogmatism that the US and Britain liked to preach after the collapse of communism. The IMF and World Bank had already started to distance themselves from the idea that countries seeking their assistance should be encouraged, or required, to adopt free-market mechanisms on the US model. But the outcome of the London summit is the clearest signal yet that the US model inherited from the Clinton and Bush years will be regarded as one way of doing things, alongside others. In the new world order, economic transparency, accountability and effectiveness will also be considered virtues.

The US is becoming just another big country

We do not know exactly what went on inside the ExCel centre. Beyond it, though, all eyes were on Barack and Michelle Obama. Separately and together, they were the couple the crowds turned out to see. President Obama was the national leader most in demand for bilateral meetings, starting with breakfast, a round of talks and a long-ish press conference at No 10. From what we know about preparations for the summit, and from the communiqué, however, the voice of the United States was one, albeit an influential one, among others.

In London, Mr Obama's celebrity status seems not to have translated into diplomatic weight. This may reflect the "listening" stance he has adopted in contrast to his predecessor's air of certainty. It could reflect the US economic plight or, more prosaically, it could simply be because he has yet to appoint many Treasury and State Department officials. But it could also be a sign of new times. By inclination or by necessity, the post-Bush United States seems to see its place in the world a little differerently: less American exceptionalism, more consensus-seeking. In the G20, the presence of China, India and Indonesia, among others, gives a foretaste of a future world order.

China made its shy debut as a rising power

Right up there with Barack Obama as the international leader most indemand for bilateral meetings was Hu Jintao, President of China. Even so, he kept a low profile; fitting in, saying nothing out of turn. There was an ambivalence that suggested uncertainty about how to handle growing power. Before the summit, China had backed a proposal for a new international reserve currency – an idea whose time may yet come. It had also fended off another US demand for it to reduce the trade imbalance by revaluing its currency. In London, China's rise was treated by everyone else as inevitable, if not already a fact. President Hu still seemed desperate not to scare the horses.

Britain has a future as host to the world

A parochial post script. It was all going to be an ill-temperered disaster; draft communiqués, M. Sarkozy complained, were crossing his desk by the hour. In the event, there were smiles, the sun shone, the roads were clear, there were drinks with the Queen, dinner at Downing Street – and an agreement that satisfied even the French. So, not a disaster at all.

Countries that don't comply with international standards on taxation, supervision and money laundering

ramana wrote:What can India do to create a parallel track exchange mechanism for the smaller economies like in East Africa and some like minded Gulf countries?