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EU’s G20 push for regulation clouded by transatlantic tensions

Brussels — European countries are pushing for the G20 summit to focus on revamping the global financial architecture but clashes with Washington have overshadowed their drive.

Transatlantic tensions over the focus of the summit have marked the run-up to the April 2 meeting in London, which is supposed to be a demonstration of top-level unity between the world’s leading economic powers.

European leaders have repeatedly rebuffed US pressure to plough more money into their ailing economies as part of an international effort to revive withering global demand.

The dispute turned ugly last week when Czech Prime Minister Mirek Topolanek, whose country holds the rotating EU presidency, described the United States’ ambitious but costly economic stimulus plans as "a way to hell."

He also said "the United States is not on the right path" with its costly stimulus plans, and insisted "we need to read the history books" to avoid the same mistakes.

The remarks sent top aides scrambling to back track, with one insisting Topolanek never made the "hell" remark.

Since then, officials have been trying to paper over transatlantic differences.

"There is no dichotomy between stimulating the economy and improving global financial regulation," European Commission chief Jose Manuel Barroso said on Friday.

"We need both if we are to get the economy moving again and to restore confidence in a lasting way."

Washington is spending trillions of dollars to support its banking system and drag the world’s biggest economy out of its deepest recession in decades.

Meanwhile, the 27-nation European Union has committed to economic stimulus measures in 2009 and 2010 worth 400 billion euros (540 billion dollars), equivalent to 3.3 percent of the bloc’s gross domestic product.

The figure includes both national and EU level stimulus measures as well as automatic increases in social spending, such as unemployment benefits, which kick in when the economy weakens.

In Berlin, a German spokesman said there were "no points of contention here between us and the US government.

"For both of us, and our position has been made clear for some time, regulation of financial markets is the focus of the meeting," the spokesman said after Chancellor Angela Merkel and US President Barack Obama held a video conference on Thursday.

The rift between Europe and the United States over the focus of the summit has been narrowed by Washington’s announcement on Thursday for sweeping financial regulatory reforms, including a single watchdog for all key financial institutions and payment systems.

Like the United States, the EU wants to clamp down on hedge funds, private equity funds and the use of complicated credit derivatives as well as offshore tax havens.

Europe is also in favour of doubling the International Monetary Fund’s resources for bailing out troubled countries to 500 billion dollars, while Washington wants to go even further by tripling its funds.

It also wants colleges of supervisors for all major cross-border financial institutions to be set up before the end of 2009 in order to keep a closer eye on big international groups.