EU eyes role of China, India in global financial reform

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(Xinhua)
Updated: 2008-10-22 06:35

BRUSSELS -- The European Union (EU) said Tuesday it would urge China and India, the two largest emerging economies, to take part in a planned world summit on reform of the global financial system.

French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso told the European Parliament in Strasbourg, France that they would convey the message to their Chinese and Indian counterparts when they fly to Beijing for the seventh Asia-Europe Meeting later this week.

"With President Barroso, we are going to visit China, the aim being also to convince China and India to take part in this summit, " Sarkozy, whose country holds the EU rotating presidency, said, referring to an upcoming summit on possible overhaul of global financial system to prevent recurrence of the financial crisis.

After a meeting with Sarkozy and Barroso at Camp David last Saturday, US President George W. Bush agreed to host a world summit on the financial crisis, which was expected to be held shortly after the U.S. presidential election on November 4.

Sarkozy said the summit should bring together the Group of Eight largest industrialized nations (G8) and the five biggest emerging economies, led by China and India.

"Who will take part in this summit? There are a lot of different schools. I believe the most straightforward thing would be the G8, obviously with Russia. We need to add the G5 to that, obviously with China and India," he told EU lawmakers.

Sarkozy, who came out with the original proposal for global finance summits, stressed that the financial crisis is of a global nature, which needs global solutions.

Sarkozy also called for a special meeting with other EU leaders in preparation for the global finance summit.

The global finance summit was called at a time when Europe and the U.S. were still struggling with the financial crisis, which sent many western banks to the brink of collapse and prompted governments to spend billions of dollars to restore stability and confidence.

Sarkozy also suggested EU member states should set up their sovereign wealth funds to buy stakes of troubled banks falling prey to the financial crisis.

Sarkozy said those sovereign wealth funds could be set up by individual member states as an industrial response to the financial crisis.

The EU has been skeptical of those sovereign wealth funds that are set up by oil producing countries and Russia with their oil revenues, calling for tougher regulation and more transparency.

Analysts said Sarkozy's proposal was largely aimed to prevent European ailing banks from falling into foreign hands in the wake of the financial crisis.

In a bid to improve policy coordination within the euro zone, Sarkozy called for economic governance of the 15-nation bloc and regular summits among its leaders.

Leaders of the 15 EU nations that use the euro held their first ever summit in Paris earlier this month. It was called by Sarkozy in an urgent mode to find coordinated solutions to the financial crisis.

Sarkozy wanted the emergency summit to become a regular one, suggesting Luxembourg Prime Minister Jean-Claude Juncker, who now chairs the monthly meeting of eurozone finance ministers, also chair the summit.

Sarkozy has long been in favor of a stronger role for eurozone governments in management of their single currency, which should be handled by the European Central Bank independently.

Several members, notably Germany and the Netherlands, are against the idea of eurozone summit for fear that it could divide the whole EU and exert political interference in the ECB's independence.

Sarkozy said the summit would not necessarily undermine ECB's independence, but there should be policy dialogue between the ECB and national governments.