G-8 will hold summit on global financial reforms

Leaders of the world’s eight major industrialized nations are to meet as early as next month to begin mapping out a joint strategy for preventing another global financial meltdown.

The announcement of a G-8 summit came as leaders in Europe, including British Prime Minister Gordon Brown, called for sweeping overhauls of institutions such as the International Monetary Fund and the World Bank to build a new global system of finance out of the ashes of the present one.

Brown said conditions required the same kind of vision that resulted in the United Nations and the Bretton Woods conference that laid out an international financial and monetary system in the 1940s.

Brown also said that emerging economies such as China, India and Brazil should be represented at the G-8 meeting and that a group of supervisors from major nations should monitor the world’s 30 largest financial institutions.

The G-8 said it would convene a top-level meeting that could take place in New York.

In a group statement released by the White House, the G-8 said it would press for reforms and new regulations in the financial arena that would “remedy deficiencies exposed by the current crisis.”

“The system must be completely overhauled, an overhaul that must be global. A new form of capitalism is needed, based on values which put finance at the service of business and citizens, and not vice versa,” French President Nicolas Sarkozy said in Brussels at the start of a two-day summit of leaders from the 27-nation European Union.

Sarkozy and German Chancellor Angela Merkel have been among the most vocal proponents of a meeting of the G-8: the U.S., Japan, Britain, France, Germany, Canada, Italy and Russia.

Britain broke new ground last week with a bank rescue package that combines transfusions of taxpayer cash with guarantees of short-term loans to encourage financial institutions to resume lending to one another. Europe’s other major economies this week unveiled similar plans, which hew to an overall bailout strategy that the EU is expected to officially endorse today.

Since his days as Britain’s chancellor of the exchequer, Brown has been a champion of instituting new rules for regulating global flows of capital on a scale never imagined by the leaders who put together the present system of international finance more than 60 years ago.

Brown advocates an “early warning” system to spot potential financial crises and stricter oversight of banking practices, such as accounting standards and executive pay. Other proposed changes involve uniform rules requiring banks to disclose assets and liabilities and to prevent the hiding of “toxic” loans and the reliance on practices that “encourage excessive and irresponsible risk-taking.”

Brown’s handling of the crisis has helped him shore up his dismal standing in British polls and has made him Europe’s newest and, in some ways, unlikeliest star, with some commentators hailing him as the savior of world finance.

At a meeting with foreign reporters Tuesday, one journalist asked whether Brown is “Flash Gordon” now.

“Just . . . just Gordon, I assure you,” he stammered, looking both flustered and pleased.

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henry.chu@latimes.com

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Joblessness rises in Britain

LONDON -- Britons faced another warning sign Wednesday that their nation is on the verge of recession: The government said the number of unemployed people increased by 164,000 in the three-month period through August. That brought the jobless total to 1.79 million people -- even before the bite from the latest financial carnage.

Britons have lost work in a wide variety of businesses -- from chocolate makers to car manufacturers to finance -- as employers rein in spending. Many economists believe the number of unemployed will top the 2-million mark by the end of the year.

“The UK economy is contracting; it would be farcical not to expect an upswing in unemployment,” said Jamie Dannhauser, British economist for Lombard Street Research, who predicts that the current unemployment rate of 5.7% will rise to 6.5% by the middle of next year.

Source: Associated Press