Merkel and Sarkozy demand tough market regulations

Tough regulation of global financial markets is a non-negotiable demand of France and Germany at tomorrow’s G20 summit, Nicolas Sarkozy and Angela Merkel said today.

In a tough-speaking joint press conference in London on the eve of the summit, the two leaders left no doubt that they will refuse to sign an agreement which does not meet their “red lines” on tax havens, hedge fund regulation, banking transparency and a worldwide cap on bankers’ pay.

Mr Sarkozy said that the summit provided a once in a lifetime opportunity to give capitalism a conscience.

He said: “Germany and France will speak with one and the same voice.

“We are aiming for the same objectives in terms of principles and how we apply those principles. The objective is a simple one – we demand results, we want hard and fast results.”

He added: “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.”

Mrs Merkel said that Germany was ready to offer support to poorer countries which are unable to deliver fiscal stimulus packages of tax spending and public investment from their own resources.

But she made clear that both France and Germany feel they have already implemented substantial stimulus packages of their own.

Mrs Merkel said that France and Germany wanted to see “a new architecture and new regulations for financial markets” spelt out very clearly in the final communique of the summit.

She added: “We have come in a constructive mood. We don’t want results that have no impact in practice but results that change the world as we know it.”

The comments by President Sarkozy and Chancellor Merkel drive another nail into the coffin of the hopes initially nurtured by British Prime Minister Gordon Brown and US President Barack Obama that the London summit would produce a co-ordinated second round of fiscal stimulus packages from the world's biggest economies.

Mr Sarkozy made clear that he was not ready to take direction from the US on economic policy, noting that “we live in a multi-polar world” and remarking pointedly: “The crisis didn’t actually spontaneously erupt in Europe, did it?”

The French president said he trusted Mr Obama and was not pointing the finger of blame at any specific country for the economic crisis.

But he indicated that France and Germany would be ready to discuss other issues only if they felt their priority of tougher regulation was being adequately dealt with.

“We are not fingering anyone as being responsible for the crisis,” said Mr Sarkozy. “This is a historic and unique opportunity to build a new world and this opportunity we do not want to see pass by.

“We are in the 21st century. The time has come to lay the foundations of rules and regulations for the 21st century.”

Asked whether he was ready to walk out of the summit if his demands were not met, he said: “This is nothing to do with ego or temper tantrums, this has to do with whether we are up to the challenges ahead or not.

“Of course we have to make compromises... but compromise has to be engaged in by all regions of the world, especially as the crisis didn’t actually spontaneously erupt in Europe, did it?”

Both Mr Sarkozy and Mrs Merkel insisted that tomorrow’s summit must result in firm agreement on concrete action to be implemented straightaway.

Mrs Merkel said there was no option of coming back for a third summit if decisions proposed in Washington at the end of last year result in only a vague statement of intent in London.

She said: “The day after tomorrow will be too late. The decisions need to be taken now – today and tomorrow.”