Chancellor Angela Merkel and French President Nicolas Sarkozy have sent the following joint letter to the acting EU Council President, the Prime Minister of the Czech Republic Mirek Topolánek, and the President of the European Commission, José Manuel Barroso.
Dear Sirs,
With this letter, Germany and France aim to make a contribution to preparing the spring summit meeting of the EU Council and strengthening the joint voice of the EU at the G20 summit meeting. Only if we speak with one voice will we be strong enough to defend our shared interests, and steer our national economies once again onto a course leading to sustainable growth in the global economy.
In the run up to crucial conferences, we are fully convinced that we must make the most of the unique historical opportunity offered by the G20 summit meeting in London on 2 April 2009 to take a continued firm stand against the root causes of the global crisis, which we identified at the Washington summit. Top priority must be accorded to putting in place a new global financial architecture. The European Union must take a joint stance and play a trail-blazing role in this process.
Within the framework of a coordinated approach under the aegis of the French and Czech presidencies, the European Union and its member states have successfully helped cushion the economic impacts of the current global recession. At a cost of more than 400 billion euros (or some 3.3 percent of the GDP of the EU), the European stimulus programme is helping businesses ride out the crisis. It is creating new investment, strengthening demand, securing jobs and giving significant incentives to revitalise the global economy. This makes Europe a frontline fighter in the war on the global recession. At the coming EU Council meeting we should send a strong message of trust and confidence in the scope and effectiveness of our own recovery programmes to our citizens, our partners and the economy as a whole.
Stability and properly functioning financial markets are directly relevant for growth and for jobs. Based on the outcomes of the Berlin preparatory summit in February, we are determined to achieve concrete results for further measures to step up the regulation of international financial markets at the London summit, and we expect that the implementation of the G20 action plan will be monitored by the IMF and the Financial Stability Forum, in order to ensure that more responsibility is accepted.
The European Union should propose that all hedge funds and other private investment societies which can represent a systematic risk be subjected to appropriate registration, regulation and supervision. We must work to put in place effective sanctions, which will protect our countries from risks arising as a result of a lack of transparency and regulation in non-cooperative states and regions, which ought to be named specifically. We should also make every effort to regulate the salaries of top executives, such that they are rewarded for transparent and long-term results.
The procyclical impact of the current demands made of equity capital are only aggravating the crisis, by further limiting the lending ability of banks. Industry in particular is feeling the pinch. In addition to accelerating the Basel II reforms and accounting regulations designed to ensure that banks build additional reserves when times are good, the European Union and the G20 should work to push through short-term measures to cushion the procyclical impacts of the current crisis. We call urgently on the working groups and institutions working in this area (the Financial Stability Forum, the Basel Committee on Banking Supervision and the EU Commission) to make relevant recommendations at their earliest convenience.
The financial sector needs greater stability, supervision and transparency. In this context we welcome the Larosière report and the communication from the Commission, in which it proposes a demanding new reform programme for the financial sector. As a contribution to the development of international standards the European Union must take decisive action in terms of a European regulation system, on the basis of the recommendations laid out in the Larosière report. The first decisions must be made by June.
The European Union should support a new charter for sustainable business, which would provide a framework that has the support of the states and international organisations. It should put its faith in market forces, but aim to ensure the stable, socially balanced, sustainable development of the global economy. In the final analysis it should lead to the creation of a global steering structure.
In the short term, the economic and financial measures already taken risk distorting competition and obstructing the free movement of goods, services and capital. We thus expressly call on the European Commission to carefully monitor all threats to fair competition on the European single market and also in terms of our international partners, and to report to the Council. We would also like to stress our responsibility for ensuring that no new trade barriers are created, for convincing our partners not to resort to measures of this sort, and for bringing the Doha Round to a speedy conclusion.
In the long term, excessive national debt is also a threat to global stability. Healthy public finance is thus crucially important for credibility and stability in the European Union. We must commit ourselves to consolidating our public finances by implementing the Stability and Growth Pact. Once the economy begins to pick up, the consolidation efforts must be stepped up in order to ensure that budget deficits are once again pushed down below the reference limit. We find ourselves facing greater challenges, and must return to our medium-term budget targets as soon as possible in compliance with the Pact and in line with economic recovery.
Solidarity and responsibility are key principles of the EU. In line with these principles, France and Germany welcome the fact that the EU has shown itself to be ready and willing to help those member states that need support. This once again confirms the fact that the euro zone is not a ‘closed society’.
We look forward expectantly to the discussions at the coming EU Council meeting.
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The EU must act as one, say Angela Merkel and Nicolas Sarkozy
Tue, 17.03.2009
Chancellor Angela Merkel and the French President Nicolas Sarkozy have called for the EU to join forces to tackle the economic and financial crisis. The EU can only make itself properly heard if it speaks "with one voice", they declared. Top priority must be accorded to putting in place a new global financial architecture.
