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European leaders pledge finance changes

Targets include hedge funds, tax havens

Craig Whitlock Washington Post

BERLIN – European leaders on Sunday pledged to establish global oversight of hedge funds, crack down on tax havens and beef up other rules as part of a reformation of the international monetary system.

Leaders from eight European countries, meeting in Berlin, said they had agreed on broad principles for bolstering the regulation of global finance in advance of a summit of the world’s leading powers April 2 in London.

“A clear message and concrete action are necessary to engender new confidence in the markets and to put the world back on a path toward more growth and employment,” said German Chancellor Angela Merkel, who hosted the meeting.

The officials were seeking to adopt a common European negotiating strategy for the summit, which will be attended by the United States, China, Japan, India, Brazil and other large economies known as the Group of 20.

Prompted by the recession and credit crunch, each of the countries has said it supports changes in the way international banks and investments are regulated. But deep differences remain on the best approach, and it is unclear whether the summit will produce a new set of globally enforceable rules.

In Berlin, leaders from Germany, Britain, France, Italy, Spain, the Netherlands, the Czech Republic and Luxembourg said they had agreed on seven points, including restrictions on hedge funds and other private pools of capital that have gone largely unregulated around the world.

They also said they support tougher measures against countries and offshore jurisdictions that serve as tax havens, blaming them for an assortment of problems.

“As far as uncooperative players, tax havens or areas where nontransparent business is carried out, we need to develop sanction mechanisms,” Merkel said. “These must be made very concrete.”

French President Nicolas Sarkozy said European countries would compile a blacklist of suspected tax havens and would impose unspecified penalties to pressure them to change. “A new system of regulation without sanctions would not have any meaning,” he said.

The European Union and the United States have recently taken a tougher line against some countries, most notably Switzerland and Liechtenstein, for their banking secrecy laws, which are often used by investors to hide taxable income.

British Prime Minister Gordon Brown said global financial agencies such as the International Monetary Fund needed an extra $500 billion to improve their ability to bail out ailing economies. The IMF has recently provided rescue funds for countries in Eastern Europe, including Hungary, Latvia and Ukraine.

“There is a need for a global New Deal so that the world economy can recover,” Brown said.

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