New Global financial 'constitution'

While turning a deaf ear to Washington's call for more fiscal stimulus, the EU is pushing hard for concrete results in reforming the global financial architecture.

The EU, led by Germany and France, has stressed that financial reform should be the top priority at the London G20 summit, saying it would not only help prevent recurrence of the current financial crisis, but also help rebuild confidence.

German Chancellor Angela Merkel called on Saturday for a "global financial market constitution" to improve regulation of the financial markets.

"We need a global financial market constitution as has not existed before, so that we can finally draw lessons from this disaster," Merkel said at a political gathering of her Christian Democratic Union.

In an interview with the Financial Times on the same day, Merkel said she expected "good results" from the London summit.

The EU hammered out a joint front at the London summit earlier this month, calling for regulation and oversight of all financial markets, products and participants that may present a systemic risk, including hedge funds, private equity, credit rating agencies and tax heavens.

Corporate remuneration practices, banks' capital requirement and accounting standards, which contributed to the current crisis, all need to be improved, it said.

There is also a call for reform of international financial institutions, in particular the IMF. The EU wants to improve IMF surveillance instruments in order to strengthen its key role in crisis prevention, boost the fund's lending resources and support a change of power sharing in the IMF by giving emerging economies a bigger say.

With their contribution to the world economy increasing, the emerging economies are justified to have a bigger voice in international financial institutions.

"We call for urgent action with regard to voice and representation in the IMF in order to better reflect their economic weights," Brazil, China, Russia and India, also known collectively as BRICs, said in a joint communique at the G20 finance ministers' meeting earlier this month.

They also called for a study on the role of international reserve currencies and enhanced IMF monitoring of developed economies since the financial crisis actually did not happen in developing countries.

'No' to protectionism

In the face of an economic downturn, there is an increasing risk that more governments would resort to protectionist measures.

Although the G20 members committed themselves to free trade at the Washington summit, not all of them have kept their words.

Concerns have been voiced over the so-called "Buy American" clauses in the newly-adopted US economic stimulus package, which barred the use of foreign iron, steel and manufactured goods in public works projects funded by the plan.