Sarkozy and Merkel demand action

NICOLAS SARKOZY and Angela Merkel issued a stark warning last night that France and Germany would not sign up to an agreement at today’s G20 summit unless there was tough action to regulate world financial markets.

At a joint press conference at a London hotel, the two leaders made clear that they were not satisfied with the proposals on the table for the gathering in London.

“Germany and France will speak with one and the same voice,” the French president declared. “These are our red lines.”

The hardline position taken by Paris and Berlin is potentially a major stumbling block for British Prime Minister Gordon Brown’s hopes of hammering out a deal to get the global economy on track.

Earlier, an upbeat British prime minister flanked by US President Barack Obama confidently predicted that they were “within a few hours” of agreeing a comprehensive global plan for economic recovery.

However, as the leaders prepared to assemble for a working dinner at No 10, Downing St acknowledged that there was still more work to be done if they were to reach a deal. “We are making good progress but we are not there yet,” Mr Brown’s spokesman said. “There are still a number of issues to be ironed out. I think there is emerging consensus, but not everything is yet pinned down.”

At their news conference, Mr Sarkozy and Ms Merkel insisted that there had to be “hard and fast results” on tax havens, hedge fund regulation, banking transparency and a worldwide cap on bankers’ pay.

“This is a historic opportunity afforded us to give capitalism a conscience, because capitalism has lost its conscience and we have to seize this opportunity,” Mr Sarkozy said.

Ms Merkel added that they were united on the need to lay the foundations of a new global financial architecture. “We simply cannot afford to remain vague on these fundamentals for a new architecture.”

Mr Sarkozy dismissed accusations of grandstanding over an earlier threat to walk out of the summit if the issue could not be resolved.

“This has nothing to do with ego, this has nothing to do with temper tantrums. This is to do with whether we are going to be up for the challenges ahead or not,” he said.

Mr Obama was in an emollient mood, saying that he had come “to listen and not to lecture”.

However he rejected suggestions the “Anglo Saxons”, the US and Britain, were holding out against reform of the international financial system.

“History shows us that when nations fail to co-operate, when they turn away from one another, when they turn inwards, the price for our people only grows. That is how the great depression deepened. That is a mistake we cannot afford to repeat,” he said.