13th May 2021

EU worried about G20 backsliding on financial reform

  • The G20 summit in London last year. Mr Barroso is worried a number of G20 leaders are reneging on their commitments (Photo: EUobserver)

EU leaders signaled their concern over what they perceive as waning global enthusiasm for financial regulatory reform on Friday (March 26), and said they will push ahead with European plans before a G20 meeting in Toronto this June.

Presenting leaders with his preparations for the G20 meeting, European Commission President Jose Manuel Barroso said he wanted agreement first on a number of key European financial files, including plans to force banks to hold higher levels of capital and the bloc's draft hedge fund directive, delayed earlier this month due to upcoming elections in the UK.

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"I think it's very important that Europe concludes its own work so that we can go to Toronto and show to our partners what we really have already done," Mr Barroso told a press conference after the summit.

"It is very important that the leaders in the G20 do not water down their ambitions. In fact there are some worrying signals," he added.

Earlier this month, US treasury secretary Timothy Geithner sent a letter to the EU financial services commissioner, Michel Barnier, complaining that the bloc's draft hedge fund rules would disadvantage American firms.

In final conclusions published after the summit's ending, the 27 leaders also say progress is needed on developing financing instruments for crisis management.

The commission is set to come forward with a report on "possible innovative sources of financing" in the coming weeks, with the list of ideas likely to include a global levy on financial transactions. However, Washington has vehemently opposed the measure in the past, and experts say it could not work without worldwide support.

Reluctance on 2020 poverty target

EU leaders also discussed a new 10-year economic plan for the region, known as the EU 2020 agenda. A commission proposal to reduce the number of EU citizens at risk from poverty by 20 million, one of five headline targets put forward by the EU executive body in a communication earlier this month, ran into member state opposition.

"We feel that the poverty criteria doesn't make any sense," said Danish Prime Minister Lars Lokke Rasmussen, explaining that under the current EU definition of poverty, lower average incomes in eastern European states could give the impression they had lower poverty levels than some richer European states.

"Further work is needed on the appropriate indicators," the 27 leaders said in the meeting's final conclusions, with broad agreement reached on the other four EU headline targets, including a 75 percent employment rate by 2020 and reaching the EU's environmental goals by the same date.

Figures on higher rates of education were left out of Friday's document however, following German and other federal state concerns that this was a regional competence and therefore needed more time to be agreed on. The goal to spend three percent of EU GDP on research and development was left in, despite some reservations.

In a move that analysts say distinguishes the EU 2020 plan from its failed former version, the Lisbon Strategy, EU targets are set to be broken down into differentiated national targets in a bid to achieve greater implementation levels.

Also attending Friday's final press conference, Spanish Prime Minister José Luis Rodríguez Zapatero said leaders would discuss these national targets amongst themselves at the next leader's summit in June. Diplomats suggested however that this date was 'ambitious'.

Iron-lady Merkel

With much of the summit dominated by Greece's current debt difficulties, German media on Friday welcome their Chancellor Angela Merkel's hard bargaining as a huge success.

A final accord between eurozone leaders, struck late on Thursday night on how to provide funding to Greece, should it be necessary, was almost a carbon copy of an earlier Franco-German text.

That text in turn was dominated by German ideas, said summit insiders, with Ms Merkel winning eurozone acceptance for a joint IMF role, despite widespread earlier opposition.

"Merkel has won against all odds - against Sarkozy, the European Commission and a large part of the chattering classes at home, which insisted that Germany remain the good 'Europayer'," said Josef Joffe, publisher-editor of respected German weekly Die Zeit.

On Friday Ms Merkel said the agreed mechanism should be viewed only a temporary solution, and should be replaced by a purely European mechanism in the medium-to-long-term, adding that EU treaty changes would almost certainly be needed.

German finance minister Wolfgang Schäuble's floated a plan for a IMF-sytle European Monetary Fund earlier this month.

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