Germany and France are at the forefront of an initiative urging G20 nations to come up with concrete measures for revamping the global financial system at their upcoming summit in London.
Merkel and Sarkozy want better regulation, not more spending
German Chancellor Angela Merkel and French President Nicolas Sarkozy have said the G20 meeting of rich and emerging nations needs to produce "concrete results for reinforcing international financial regulation" and an action plan aimed at strengthening the role of global financial institutions.
"The top priority is the putting in place of a new global financial architecture," the two leaders wrote in their joint letter to the Czech EU presidency on Tuesday, March 17.
Merkel and Sarkozy said the EU should propose the registration, regulation and supervision of all hedge funds and other private investment firms that could pose a systematic risk.
Leaders attending the April 2 G20 summit are to debate reforms to the international financial system in light of the global economic crisis.
No new measures
The joint letter was the latest signal to Washington that France and Germany oppose pushing new stimulus measures as a way of dragging their economies out of recession.
"We should send a strong message … of our faith in the scope and effectiveness of our own stimulus programs," the letter said.
While the US and other countries such as Japan are pressing for governments to focus on fiscal measures to ward off the recession through more government spending, Merkel and Sarkozy have both ruled out another round of economic stimulus packages.
Commitment to stability
The US has pushed for more spending by countries to ease the global downturn
The European approach is seen as overt criticism of an excessive form of capitalism that Germany and France blame for the global crisis. Merkel and Sarkozy have singled out executive pay, writing that the EU should look at rules to govern sometimes-outlandish corporate wages.
They also said a sanctions mechanism for states that are uncooperative on regulation and transparency should be looked into.
The two leaders also stressed the importance of EU members adhering to the bloc's Stability and Growth Pact, which requires them to keep annual public deficits to 3 percent of gross domestic product.
"Excessive public indebtedness threatens long-term global stability," the letter said. "Healthy public finances thus remain crucial for the credibility and stability of the European Union."