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Europe's G20 leaders to call for banks to return to 'basics'

EUROPEAN leaders from the Group of 20 states, meeting in Berlin yesterday, would press banks to go back to "basics" and set aside more funds for lean times, German Deputy Finance Minister Joerg Asmussen said.

Europe's G20 leaders plus European Central Bank President Jean-Claude Trichet and Bank of England Governor Mervyn King would explore how to compel lenders to increase capital reserves in periods of faster economic growth, said Asmussen, who helped draft the program.

"Business policy by banks is part of this crisis," Asmussen told reporters in Berlin on Friday. "We need to agree means, probably by augmenting Basel II banking rules, to force them to save for when economies cool."

Banking rules were one of the topics to be discussed at the meeting hosted by Chancellor Angela Merkel with leaders including British Prime Minister Gordon Brown, French President Nicolas Sarkozy and Italian Prime Minister Silvio Berlusconi. Also on the agenda were mounting problems for eastern Europe, which was more exposed to the effects of the crisis than the west; tax havens; protectionism; and the role of the International Monetary Fund.

"We want to make sure that in future there will be no blind spots on the world map when it comes to financial-market products, market participants and instruments," Merkel said on Saturday in her weekly podcast.

United response

Merkel has said that she wants a united European response to the deepening recession to present at a full session of the G20 in London in April to be attended by United States President Barack Obama on his trip to Europe.

The G20 includes the major industrialized and developing countries, including China, Brazil and India.

"European leaders are coming to this meeting with differences over things such as fiscal stimulus and future regulatory steps," Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, told Bloomberg News. "Do Merkel, Sarkozy and Brown want to go to the London G20 summit as just national leaders, or representing a common European position?"

The meeting will build on the results of the G20 summit in Washington in November, which drew up 47 points for action to overhaul the global financial system.


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