European leaders remain unified on the need to regulate financial markets

The need to adopt a unified global solution to overcome the ever unraveling worldwide financial crisis was the common message passed on by leaders of the major European economies at a meeting held in Berlin over the weekend, attended by UK Prime Minister Gordon Brown. .

German Chancellor Angela Merkel who hosted the meeting reiterated the fact that the World faced an “extraordinary international crisis”. Gordon Brown, in his speech, once again warned against reverting to protectionism whilst combating difficult economic climate.

The meeting, held in Berlin, was a precursor to the next meeting of the group of major developed and developing countries in London on 2 April, The group, known as the G20 are a form of European think tank. Whose goal is correct the current wrongs within the European and global financial system?

A key player in G20 will be Nicolas Sarkozy. The French President who stated that the group stands to bear a “historical responsibility” in their drive to reform global finance.

“We have to succeed, because If we fail there will be no safety net,” said the President.

Gordon Brown stressed that there was a need to create an economy that is based on the “soundest principles”, saying the world needed a “global new deal”.

Leaders said there was a need for international institutions, including the International Monetary Fund, to play a greater role not just to help countries in financial trouble but to prevent countries from getting into such difficulties.

Brown said leaders had agreed that the IMF needed access to at least $500bn (£348bn).

The subject of bankers bonuses was one of the “hot potatoes” at the meeting, with a consensus was reached that as well as greater supervision of all financial markets and instruments the need to reassess the issue of pay at finance firms was of great importance. The fact was acknowledged that 

Bankers’ bonuses have been inordinately high despite the bank’s poor profit performance.

Also over the weekend, Prime Minister Brown, in an uncharacteristic nostalgic mood, called for a return to more prudent lending by British banks

“We do want to see the reinvention of the traditional savings and mortgage bank in Britain, for loans to be made on prudent and careful terms, not just to people with large deposits, but to first-time buyers and those on middle and modest incomes,” said Gordon Brown referring to the banks erratic lending policies that were the principal causes of their profit meltdown

 ”We need to ensure that the U.K. banking system that emerges over the coming months is refocused on providing strong competitive banking for domestically focused businesses, including start-ups and entrepreneurs, as well as mortgages for those who want to buy a home,” Brown continued his comments in his interview published in  a leading UK tabloid. 

Looking forward, the Bank of England are expected this week to unveil plans to invest no less than one hundred billion pounds on assets designed to stimulate the flagging UK  economy.

In a similar mode, Alistair Darling, UK Chancellor of the Exchequer has insisted that the state owned Northern Rock Plc building society should expand their lending portfolio by fourteen billion pounds within the next few months.  The move, expected to be the first in a series, will be part of Brown and Darling’s seemingly unceasing efforts to kick start the UK economy.

The move to increase mortgage availability in the U.K. comes after many months of turmoil with an almost total freeze in credit for home owners. Northern Rock effectively ceased to issue new mortgages after its “hostile” nationalisation” twelve months ago.

As a sign that things remain less than rosy, Northern Rock  announced  that they  expects to report a loss of eight hundred  million pounds for the second half of 2008,  an increase of two hundred million from  the first half, largely due to increases in mortgage arrears.

In the US, chairman of the Federal Reserve Ben Bernanke is expected to face tough questions from the floor of the Congress on whether US Government policy makers are contemplating the option of nationalising the US banking system. Experts predict that Bernanke is likely to reply by stressing that that the US government is prepared to take whatever steps necessary to revive the economy. One of them may be a shift towards buying US Treasuries in an effort to lower long-term interest rates.

Continuing uncertainty caused shares to tumble on both sides of the Atlantic, with Bank of America Corp. falling more than 35 percent last week, and Citigroup Inc. declining by almost 45 percent to $1.95.  In the event of nationalisation, Bank of America and Citigroup are the most likely candidates, among the larger banks if even for a short time.

Bank of America CEO Kenneth Lewis said in a statement.

 ”We see no reason why a company that is profitable, with strong levels of capital and liquidity, and that continues to lend actively should be considered for nationalization,”

Both Bank of America and Citigroup have received billions of dollars in financial aid from the government.

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Tags: Angela Merkel, British Economy, Economics, Economy, Financial News, Gordon Brown, UK Banks, UK Recession