Barroso tells EU leaders to avoid protectionism
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European leaders meeting in London were warned yesterday not to succumb to the temptations of protectionism or the irresponsible pump-priming of their economies in response to global financial market turbulence.
Jose Manuel Barroso, European Commission president, made the appeal ahead of a “credit crunch summit” last night in Downing Street of the leaders of Britain, France, Germany and Italy.
Mr Barroso warned against knee-jerk reactions to the global downturn, urging action that was “both targeted and proportionate”.
“We must not be tempted into protectionism, or futile attempts to stem financial globalisation, or an artificial stimulus of the economy,” he said.
His comments follow suggestions by Dominique Strauss-Kahn, head of the International Monetary Fund, that an anti-recession strategy required a fiscal stimulus to support interest rate cuts.
Last night’s summit saw Gordon Brown, UK prime minister, Nicolas Sarkozy, French president, Angela Merkel, German chancellor, and Romano Prodi, Italy’s premier, insisting that the European economy was fundamentally strong.
But they proposed a series of measures to make the global economy more resistant to future cross-border crises, including giving the IMF an enhanced surveillance and early-warning role.
The summit gave the four national leaders a chance to show that their domestic economic problems were international in nature. Mr Brown’s spokesman was quick to point out that the current difficulties “have their origins in the US”.
There is broad agreement between the four national capitals and Brussels on the need for greater transparency in banks’ off-balance sheet liabilities, improving the effectiveness of credit ratings agencies and boosting co-operation between national regulators.
Much of this agenda will be pursued in Tokyo next week at the Group of Seven industrial powers meeting, but there are also fundamental differences between the EU members on more ambitious proposals.
Italy has suggested creating a pan-European regulator - an idea rejected by Britain - while Germany is less certain than the UK that industry-led regulation is the best solution in every case.
Mr Brown argues that Europe should not repeat the mistakes of the postEnron years in the US by over-regulating.
The leaders discussed the broader economic situation, with a clear divide opening up between Europe and the US on how to fight the downturn. In the US, the administration has adopted a large-scale fiscal stimulus to fight off a possible recession. European governments have suggested they see little need for emergency measures to sustain growth.
Nor has the European Central Bank offered any concrete sign that it will soon emulate the US Federal Reserve and announce an interest rate cut. ECB policymakers appear instead to be troubled by persistent inflationary pressures in the eurozone economy.
EU forecasters acknowledge that they will next month cut predictions of this year’s economic growth to about 1.8 per cent.
Filed by Egor Ouzikov under Multilateral Trade