Merkel calls for tighter rules at G20 summit

Speaking ahead of the meeting, Merkel told the Sueddeutsche Zeitung, “I see a number of actors with which we can start working – there is for one, the forum for financial stability, in which the regulatory authorities and the central banks of the industrial countries work together.

“This forum has already prepared a whole row of suggestions, for example for the transparency of the finance markets and the regulatory structures, which are at least in part already implemented. This forum for financial stability must be expanded to include important developing countries.

“We must also consider how we can improve the cooperation between the national regulatory authorities and the various institutions, for example the international monetary fund and the forum for financial stability.”

She also said governments must better dovetail the bank-specific viewpoint of the regulators with the market-related viewpoint of the IMF, and strengthen the latter’s role. “In general, there must be no more blind spots in which risks can be built up unseen,” Merkel said.

Merkel has positioned herself at the more interventionist end of views at the Washington summit, saying the German social market model should become the basic model of the world.

“We are experiencing the excesses of the markets at the moment. These must be limited so that such a crisis is not repeated,” she told the paper.

She said the crisis was demonstrating the kind of damage which could be wreaked when what she called the necessary insight was missing internationally and structural limits were not tight enough.

“The international community must now ensure that they work together, and I expect that the banks support this process,” she said. “Therefore I have no understanding for the warnings against too much regulation and state influence – now, shortly after the state has prevented the situation from worsening. That is unreasonable.”

Her comments came as several organisations warned against introducing too much regulation. The German chamber of industry and trade, DIHK, warned the politicians not to go too far. Manager Martin Wansleben told the Tagesspiegel newspaper, too much regulation, “increases financing costs for companies, and reduce the business options.” He called for the G20 states to act reasonably.

He said he supported the German government’s proposal to create an international credit register which he said could make clear where risks lay.

But the German Industry Association, BDI, was more reserved, the paper reported, calling for concrete suggestions for a lasting stabilisation of the finance markets to limit the affect of the finance crisis on the real economy and avoid a further weakening of the world economy.

Jürgen Großmann, head of energy giant RWE said more regulation was not needed. “We do not need more regulation which strangles economic initiative, but improved international cooperation, for example, in the financial area, in order to close regulatory gaps,” he told the Handelsblatt newspaper.