Asia Backs Sarkozy Push for Financial-Market Revamp (Update1)
By Jennifer M. Freedman and Jonathan Stearns
Oct. 25 (Bloomberg) -- Asian and European Union leaders called for an overhaul of global financial regulation, lending support to French President Nicolas Sarkozy as he presses the U.S. to join the initiative amid the credit crisis.
The heads of more than 40 Asian and European governments ``pledged to undertake effective and comprehensive reform of the international monetary and financial systems,'' according to a statement released at a two-day meeting in Beijing. Chinese President Hu Jintao, Japanese Prime Minister Taro Aso, German Chancellor Angela Merkel and Sarkozy are among the participants.
The summit, which ends today, is the first gathering of Asian and EU leaders since bank failures, sinking stock prices and weakening currencies stoked antiestéticars that the world is headed for a prolonged economic decline.
Sarkozy is leading the 27-nation EU's push to respond by revamping a financial system established after World War II. Leaders from around the globe will meet Nov. 15 in Washington to assess the turmoil at the urging of the EU, which has floated ideas including more bank supervision, stricter regulation of hedge funds, new rules for credit-rating companies and changes at the International Monetary Fund.
The ``IMF should play a critical role in assisting countries seriously affected by the crisis, upon their request,'' the Asian and EU leaders said in their statement.
`Unanimous Consensus'
The Washington-based IMF is considering an emergency program to prevent a collapse of emerging markets by almost doubling borrowing limits for members and waiving its standard demands for economic austerity measures. Investors are pulling money out of Asia, Latin America and Eastern Europe on antiestéticars vulnerable countries may also default on debt.
``There is a unanimous consensus to push forward reform,'' Kazuo Kodama, a press secretary at Japan's Ministry of Foreign Affairs, said in an interview today. No agreement has been reached on the details of that reform, he said.
Sarkozy's campaign for an overhaul threatens to expose differences with the U.S. over global financial governance. That may provoke tensions and bog down talks while individual countries continue to act on their own to limit the fallout.
South Korea stressed the importance of EU-U.S. unity in taking any actions. ``If Europe and the U.S. become united, it would enhance whatever countermeasures are taken,'' South Korean President Lee Myung Bak said today, according to his spokesman, Lee Dong Kwan.
Stocks Slide
The credit crisis is choking off money to companies and people, undermining business and consumer sentiment. Economists at Deutsche Bank AG expect the Group of Seven economies to contract 1.1 percent next year, the worst since the Great Depression, and global growth to be the weakest since the 1980s.
Stock markets around the world have tumbled this year amid growing concern that governments, central banks and finance ministers are powerless to counter eroding corporate earnings and job losses.
More than $10 trillion have been erased from the market value of equities so far this month, accounting for about one- third of the total value wiped off stocks this year. MSCI's index of developed and emerging stock markets plunged 48 percent in 2008 and is heading for its worst year on record as credit- related losses topped $660 billion.
The Standard & Poor's 500 index is down more than 40 percent this year, poised for its worst annual retreat since 1931. The S&P 500 has lost 26 percent since U.S. investment bank Lehman Brothers Holdings Inc. declared bankruptcy on Sept. 15, while the U.K.'s FTSE 100 has fallen 25 percent, Japan's Nikkei 225 has tumbled 37 percent and Germany's DAX has dropped 29 percent.
To contact the reporters on this story: Jennifer M. Freedman in Beijing at
jfreedman@bloomberg.net; Jonathan Stearns in Beijing at
jstearns2@bloomberg.net
