Page last updated at 10:39 GMT, Friday, 23 April 2010 11:39 UK

Greece and bank reform to dominate G20 meeting

Wall Street
Wall Street opposes many reforms being discussed by the G20 nations

Fears about the impact of Greece's debt crisis are expected to dominate at a meeting of G20 finance leaders in Washington on Friday.

The gathering of rich and emerging nations hopes to plan a new financial framework for a post-recession world.

But the immediate problems of Greece will focus minds, amid concern that the country may default on its debts.

"Contagion is now the word that the markets fear," said Michael Hewson, analyst at CMC Markets.

The G20 is credited with formulating a plan that helped to prevent the global recession spreading wider and deeper.

The task now is to find common ground on bank regulation and measures to spur global economic growth.

In 2009, the G20 agreed a series of pledges to strengthen regulation of financial institutions. But turning these pledges into policy is proving difficult.

BBC economics correspondent Andrew Walker said that talks on a new financial tax would be a high priority, following US President Barack Obama's appeal for reform in a speech on Thursday.

As finance minister of Canada, I am not going to impose a tax on our banks
Jim Flaherty

Mr Obama wants to raise money from financial firms to fund any future bail-outs, so that taxpayers do not have to. But he is not only opposed by many financial firms, but also other G20 nations.

Our correspondent said that finance ministers were due to discuss an International Monetary Fund proposal for two new taxes on companies in the sector; one on their borrowing, one on taxes and staff pay.

But he said that Canadian officials had objected to the proposals, although there is substantial support among other G20 governments for something along these lines.

'Very odd'

On Thursday, Canada's finance minister, Jim Flaherty, showed no signs of softening his position.

"We're a sovereign country. We can regulate our banks and our other financial institutions as we see fit," he said.

"As finance minister of Canada, I am not going to impose a tax on our banks that performed well during the financial crisis. It seems to me a very odd thing to do, to punish our banks who got the job done admirably."

Later, IMF chief Dominique Strauss-Kahn underlined the depth of the differences over financial regulation when he called for unity on the subject.

Pledges

However, no final decision is expected at the meeting. If an agreement can be reached, it is more likely to be announced at a G20 leaders' summit in June.

Other pledges agreed at last year's G20 meeting included:

  • Raising banks' capital requirements, although many firms have already done this
  • Forcing hedge funds above a certain size to be more transparent
  • Cutting the risk and improve the transparency of derivatives trading
  • Improving and harmonising international accounting rules

On none of these pledges is there universal agreement among the G20.



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