Merkel: Rein In Global Bankers or Else

Thursday, July 2, 2009 8:16 AM

Governments must follow through on pledges to reform the global financial system, German Chancellor Angela Merkel said Thursday, insisting that signs the crisis is easing cannot mean a return to "business as usual."

Addressing parliament ahead of next week's Group of Eight summit in Italy, Merkel said G-20 summits in Washington last year and in London this April took "important first steps."

"What is important is that we now implement these measures -- and, as we are seeing, there are immediately defensive reflexes against pushing through further regulation at the moment when banks feel something of a recovery," she told lawmakers.

There must be "no slackening of efforts toward a (new) financial market constitution and no return to business as usual," Merkel told lawmakers.

At the London summit in April, G-20 leaders promised major efforts to clean up banks' tattered balance sheets and get credit flowing again, shut down global tax havens and tighten regulation over hedge funds and other financial high-flyers.

International regulators' future approach to banks will have to be coordinated "so that we get a sensible field on which fair competition can take place," Merkel said.

Next week's G-8 summit in L'Aquila, Italy, should discuss giving multilateral organizations such as the International Monetary Fund and the Financial Stability Board "extra significance" to determine whether different regions' approaches fit together, she added.

The G-8 comprises Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.

Merkel said the world will have to consider how to achieve "sustainable growth" once the economic crisis is over.

She noted that while her government drew up stimulus packages worth some euro80 billion ($113 billion), it also has passed legislation aimed at limiting new debt by 2016. "We are the only country far and wide that has made such a commitment," she said.

In L'Aquila, leaders also must discuss completing the stalled Doha round of world trade talks, Merkel said, voicing hope that the new U.S. administration and India would help.

"This remains as urgent as it was a few years ago," she said. "Progress must be achieved in this Doha round."

The chancellor said she expects "clarity next year at the latest" on the future of the plethora of forums in which global leaders discuss the economy, climate change and other major issues.

The G-20 -- which adds major economies such as Brazil, China, India, Mexico and Saudi Arabia to the G-8 -- has been most prominent in efforts to fight the economic crisis.

"I think the G-20 should be the format which, like an overarching roof, determines the future" in close consultation with regional groups, Merkel said.

She added that she envisions the G-8 being a forum for "preliminary discussions ... and the actual, relevant global decisions will, I am convinced, be made in a bigger format."

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