European economies 'need for greater regulation'
The leaders of Britain, France, Germany, Italy, Spain and the Netherlands were meeting in Berlin to hammer out a joint European position for the Group of 20 meeting in London in April.
Berlin -- The heads of Europe's largest economies agreed Sunday on the need for greater regulation of financial markets and of products such as hedge funds, a German government source said.
The leaders of Britain, France, Germany, Italy, Spain and the Netherlands were meeting in Berlin to hammer out a joint European position for the Group of 20 meeting in London on April 2.
The German source said they had agreed that "no financial market, no financial product, no financial market actor should be without regulation or oversight."
And in what appeared to be a major shift in the position of countries such as Britain, the source said all the leaders agreed a tough stance on hedge funds, the highly speculative and lightly regulated products that have been blamed for fuelling instability in financial markets.
"The demand for direct regulation of hedge funds is no longer questioned by any of the participants," the source said on the sidelines of the meeting in Berlin.
London had previously resisted greater regulation of such funds, which supporters say benefit the economy by bearing risks that others are unwilling to take.
The world's major economic powers are under pressure to build on pledges made at the G20 summit in Washington in November, where they formulated an action plan for fighting the crisis.
But the global recession has worsened since then, prompting governments to push through massive economic stimulus packages and overshadowing efforts to reform the global financial system.
The national stimulus plans have sparked fears of protectionism, which could hinder efforts to present a united European front.
Spanish Prime Minister Jose Luis Rodriguez Zapatero said the focus of the London summit was clear.
"In Washington the G20 established the principles of the new international financial system.
"In London in April we have to move toward action and we are here in Berlin to renew this commitment," he said.
The Berlin talks came at the end of a week in which the economic crisis focused on central and Eastern Europe, raising fears over potential fallout among highly exposed banks in Western Europe.
Ahead of the meeting, French President Nicolas Sarkozy stressed that deep changes were required to the way the world did business to avoid repetitions of the credit crunch.
Sarkozy insisted he would not accept "a weak compromise, a cheap fix" in establishing the European position.
"The violence of the crisis, its depth, call for really profound changes. We have to start capitalism again from scratch, make it more moral... that is why I want to see a real response (in Berlin)," he added.
German Finance Minister Peer Steinbrueck had already vowed in a pre-meeting briefing paper that he would push to reinforce rules for hedge funds and better rating systems to avoid more meltdowns in the future.
But from what the German source said on Sunday, it would appear that European concerns about Britain backsliding on tighter regulation of financial markets were unfounded.
British Prime Minister Gordon Brown pledged this week that the world would see "unprecedented cooperation" in grappling with the financial crisis.
Brown has already called for a world leaders to strike a "grand bargain" to help the recession-struck global economy.
Writing in the Observer newspaper on Sunday, Brown called for a "reformed and more responsible banking system" in the wake of a huge British bailout of troubled banks.
Brown's spokesman said Sunday the prime minister had written to his European counterparts before the Berlin meeting "setting out what he believed are the essential steps that the European Union has to take in the coming weeks in order to stabilise the financial system and stimulate economies but also to build consensus towards the London summit in April."