Just two days after the Group of 20 major world economies agreed in London to step up financial supervision, the European Union has begun fleshing out an extensive overhaul of its own financial framework.
Voracious locusts became the symbol of greedy financial markets in Germany
Within weeks, the EU hopes to propose new rules regulating hedge funds and private equity and suggest guidelines to prevent excessive risk-taking in financial markets.
EU finance ministers have already proposed new rules to supervise credit rating agencies, which have been blamed for exacerbating the financial crisis by rating high-risk securities as good debt.
The 27-member bloc wants the new financial oversight system to be in place by 2010, according to Joaquin Almunia, the EU Currency Commissioner.
German Finance Minister Peer Steinbrueck, however, said he doubted that this very ambitious timetable could be kept.
In light of the severity of the crisis, Almunia said the EU would have to accelerate its efforts.
EU looking for norms in line with new US rules
Demonstrators in Frankfurt protested against using taxpayer money to fix financial markets
In Prague, EU finance ministers agreed to follow suggestions made by former IMF boss, Jacques de Larosiere as the basis for the new regulatory system. Larosiere has proposed not having a real EU oversight agency, but rather a system of networked national oversight boards for banking, insurance and securities.
The EU finance ministers also urged their governments to relax accounting norms across Europe in line with recent US moves to give banks more breathing room to deal with their toxic assets.
Under pressure from the US Congress, the US Financial Accounting Standards Board (FASB) has voted to modify the valuation of bad securities. Previous rules called for valuations at market prices, but the changes will now allow banks to hold some toxic assets longer to avoid marking prices down to current depressed market levels.
The EU ministers said that bringing the international accounting standards used in Europe in line with US rules was necessary to avoid the emergence of competitive distortions.
Obama in Prague
After meeting NATO leaders, Obama is expected in Prague for talks with the EU
These moves of convergence with the United States stand in marked contrast to the criticisms of outgoing Czech Prime Minister Mirek Topolanek, who is a virulent critic of US economic recovery efforts and has called Washington's stimulus plans "the road to hell." Topolanek will be hosting US President Barack Obama at Sunday's EU summit in Prague.
At the same time, Topolanek is expected to urge Obama to persevere with a controversial missile defense shield project in Poland and the Czech Republic that has irked the Russians and divided many members of the European Union.
But the nuts and bolts of economic recovery may take a back seat on Sunday when Obama delivers an eagerly awaited speech on nuclear non-proliferation and plans to reduce nuclear arsenals. Up to 30,000 people are expected to show up for Obama's speech in Prague's historic Castle Square.