Saturday, 21 March 2009

China in threat to shatter hopes of G20 summit deal

China may scupper hopes of a landmark deal at the G20 summit in London by opposing new rules for the world's financial system designed to prevent a repeat of the current crisis.

As the Prime Minister played down differences between the United States and Europe over whether EU nations should spend more to combat the recession, China emerged as a possible stumbling block to an agreement at the 2 April meeting.

One proposal – backed at yesterday's summit of EU leaders in Brussels – is for tougher global financial regulation including a crackdown on tax havens, hedge funds and private equity firms and an end to pay and bonuses which encourage excessive risk-taking. But Jose Manuel Barroso, president of the European Commission, said: "The main problem will come from other countries, like China for example, that don't have the culture of a common setting of rules."

Mr Brown insisted China was playing a constructive part in the G20 negotiations. "Any suggestion that China does not want a positive outcome for the G20 discussions is wrong," he said. But he admitted he would need further "private discussions" with Premier Wen Jiabao before the meeting. British officials were puzzled by Mr Barroso's intervention, pointing out that China had showed it could abide by international rules by joining the World Trade Organisation.

The Prime Minister said the EU talks had "laid the foundations" for a successful London summit after its 27 leaders closed ranks to avoid sending a negative signal to the financial markets. He said: "We have also agreed on the importance of doing what is necessary to restore jobs and growth by the fiscal actions we take.

"We are agreed on the importance of maintaining vital public investment at this time as we respond to the current crisis and strengthen our economies for the future."

Although the EU rebuffed US calls for a further economic stimulus now, some leaders made clear in private talks they have not ruled out action in future if necessary. They do not want to be seen by voters as being "bounced" into policy changes by demands from Washington, the EU or the G20.

The EU meeting agreed to call on the G20 nations to double to £344bn the emergency funds made available for the International Monetary Fund (IMF) to bail out countries during the crisis. EU leaders pledged to contribute an extra £69bn in loans to the IMF.

Source: The Independent

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