EUROPEAN SUMMIT ON FINANCIAL INSTABILITY SET

UNCLAS LONDON 000116 SIPDIS SENSITIVE SIPDIS TREASURY FOR A/S CLAY LOWERY E.O. 12958: N/A TAGS: ECON EFIN UK SUBJECT: EUROPEAN SUMMIT ON FINANCIAL INSTABILITY SET FOR JAN 29 IN LONDON SUMMARY: ¶1. (SBU) Last October, France, Germany, and the UK agreed to a Summit to discuss current financial market problems. Italy and the EU will join that meeting, in London on January 29. In advance of that summit, the respective finance ministers will meet on January 17. A Cabinet Office source told us PM Brown wants to signal that leaders are prepared to take tough long term decisions to stabilize the economy, but in ways consistent with the G7 and the Financial Stability Forum. Brown also wants to discuss transformation of the IMF, so that it takes on an additional role of early warning system of financial turbulence. END SUMMARY ¶2. (SBU) At the Lisbon EU Summit last October 19, PM Brown, Chancellor Merkel, and President Sarkozy signed an ad hoc trilateral statement regarding financial market developments. They committed to implement recommendations of the Financial Stability Forum and suggested that the EU Council of Economic and Finance Ministers (QEcoFinQ) should examine whether regulatory or other action is necessary in the EU. They agreed to meet to discuss how they might steer the work of the EU regarding long term decisions to ensure economic stability. HM Treasury official told Econoff the three were originally expected to meet on January 3, 2008; the meeting is now scheduled for January 29 and will also include Italian Prime Minister Prodi and the European Commission President Jose Manuel Barroso. ¶3. (SBU) Chancellor Darling told reporters at PM Brown's January 8 press conference that he would meet shortly with the finance ministers of France, Germany, and Italy. HM Treasury sources told Econoff that this quadrilateral meeting is now scheduled for Thursday, January 17. ¶4. (SBU) The HM Treasury official referred Econoff to a Cabinet office source who provided the following background on the objectives of the summit via email. ¶5. (SBU) Begin text of Cabinet officialQs email: The Prime Minister wants to use the meeting to discuss recent turbulence in the financial markets and follow up to the trilateral statement on financial markets made at the Lisbon informal summit. Publicly he will very much want to send the message that it is important to take the tough long term decisions necessary to ensure the stability of the economy and that the leaders of Europe's major economies stand ready to do so. The meeting will also be an opportunity to give added emphasis to the follow up work to the trilateral statement in the G7 and the EU. Here he will want to emphasize that any action taken at a global level is done in a measured way. It is also important to ensure that the work going on in the EU draws upon the work in the FSF and does not try to replicate it. More broadly an important issue that will also need to be addressed is whether the global institutional framework is well placed to respond to current challenges. Here the PM has already called for the IMF to be transformed with a renewed mandate that goes far beyond crisis management to crisis prevention - not only responsible in the manner of an independent central bank for the independent surveillance of the world economy but becoming its early warning system (for further details please see his Guildhall speech of last year). Unquote ¶6. (U) Note: Full text of PM's Guildhall speech (Address to the Lord Mayor's Banquet November 12, 2007) can be found at (http://www.pm.gov.uk/output/Page13736.asp). Relevant excerpts below: Begin Quote of PM Brown speech: The renewal of the international institutions To build not just security but environmental stewardship and prosperity free of global poverty, I want a G8 for the 21st century, a UN for the 21st century, and an IMF and World Bank fit for the 21st century. And to achieve this I want to play my part in helping the European Union move away from its past preoccupation with inward looking institutional reform and I will work with others to propose a comprehensive agenda for a Global Europe - a Europe that is outward looking, open, internationalist, able to effectively respond both through internal reform and external action to the economic, security and environmental imperatives of globalisation. I said my approach was hard headed because I am conscious of weaknesses in international institutions that need to be addressed, aware that while resolutions matter results matter even more, determined to judge success not by the number of initiatives in conference halls but by practical action for change, and resolute in my determination that we need fewer rather than more international bureaucracies. Indeed, we need a new network of change-makers - often non-governmental organisations - which deliver concrete action on the ground. The G8 has to increasingly broaden to encompass the influential emerging economies now outside but that account for more than a third of the world's economic output. Financial disruption in one country can now affect all countries. The IMF should be transformed with a renewed mandate that goes far beyond crisis management to crisis prevention - not only responsible in the manner of an independent central bank for the independent surveillance of the world economy but becoming its early warning system. END Quote LEBARON