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Cablegate: European Summit On Financial Instability Set

VZCZCXYZ0001
RR RUEHWEB

DE RUEHLO #0116/01 0111754
ZNR UUUUU ZZH
R 111754Z JAN 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC 6978
INFO RUEHXQ/ALL EUROPEAN UNION POST COLLECTIVE
RUEATRS/DEPT OF TREASURY WASH DC

UNCLAS LONDON 000116

SIPDIS

SENSITIVE
SIPDIS

TREASURY FOR A/S CLAY LOWERY

E.O. 12958: N/A
TAGS: ECON EFIN UK
SUBJECT: EUROPEAN SUMMIT ON FINANCIAL INSTABILITY SET
FOR JAN 29 IN LONDON


SUMMARY:

1. (SBU) Last October, France, Germany, and the UK
agreed to a Summit to discuss current financial market
problems. Italy and the EU will join that meeting, in
London on January 29. In advance of that summit, the
respective finance ministers will meet on January 17.
A Cabinet Office source told us PM Brown wants to
signal that leaders are prepared to take tough long
term decisions to stabilize the economy, but in ways
consistent with the G7 and the Financial Stability
Forum. Brown also wants to discuss transformation of
the IMF, so that it takes on an additional role of
early warning system of financial turbulence. END
SUMMARY

2. (SBU) At the Lisbon EU Summit last October 19, PM
Brown, Chancellor Merkel, and President Sarkozy signed
an ad hoc trilateral statement regarding financial
market developments. They committed to implement
recommendations of the Financial Stability Forum and
suggested that the EU Council of Economic and Finance
Ministers (QEcoFinQ) should examine whether regulatory
or other action is necessary in the EU. They agreed
to meet to discuss how they might steer the work of
the EU regarding long term decisions to ensure
economic stability. HM Treasury official told Econoff
the three were originally expected to meet on January
3, 2008; the meeting is now scheduled for January 29
and will also include Italian Prime Minister Prodi and
the European Commission President Jose Manuel Barroso.

3. (SBU) Chancellor Darling told reporters at PM
Brown's January 8 press conference that he would meet
shortly with the finance ministers of France, Germany,
and Italy. HM Treasury sources told Econoff that this
quadrilateral meeting is now scheduled for Thursday,
January 17.

4. (SBU) The HM Treasury official referred Econoff to
a Cabinet office source who provided the following
background on the objectives of the summit via email.

5. (SBU) Begin text of Cabinet officialQs email:

The Prime Minister wants to use the meeting to discuss
recent turbulence in the financial markets and follow
up to the trilateral statement on financial markets
made at the Lisbon informal summit. Publicly he will
very much want to send the message that it is
important to take the tough long term decisions
necessary to ensure the stability of the economy and
that the leaders of Europe's major economies stand
ready to do so.

The meeting will also be an opportunity to give added
emphasis to the follow up work to the trilateral
statement in the G7 and the EU. Here he will want to
emphasize that any action taken at a global level is
done in a measured way. It is also important to ensure
that the work going on in the EU draws upon the work
in the FSF and does not try to replicate it.

More broadly an important issue that will also need to
be addressed is whether the global institutional
framework is well placed to respond to current
challenges. Here the PM has already called for the IMF
to be transformed with a renewed mandate that goes far
beyond crisis management to crisis prevention - not
only responsible in the manner of an independent
central bank for the independent surveillance of the
world economy but becoming its early warning system
(for further details please see his Guildhall speech
of last year).

Unquote

6. (U) Note: Full text of PM's Guildhall speech
(Address to the Lord Mayor's Banquet November 12,
2007) can be found at
(http://www.pm.gov.uk/output/Page13736.asp).
Relevant excerpts below:

Begin Quote of PM Brown speech:

The renewal of the international institutions

To build not just security but environmental
stewardship and prosperity free of global poverty, I
want a G8 for the 21st century, a UN for the 21st
century, and an IMF and World Bank fit for the 21st
century.

And to achieve this I want to play my part in helping
the European Union move away from its past
preoccupation with inward looking institutional reform
and I will work with others to propose a comprehensive
agenda for a Global Europe - a Europe that is outward
looking, open, internationalist, able to effectively
respond both through internal reform and external
action to the economic, security and environmental
imperatives of globalisation.

I said my approach was hard headed because I am
conscious of weaknesses in international institutions
that need to be addressed, aware that while
resolutions matter results matter even more,
determined to judge success not by the number of
initiatives in conference halls but by practical
action for change, and resolute in my determination
that we need fewer rather than more international
bureaucracies. Indeed, we need a new network of
change-makers - often non-governmental organisations -
which deliver concrete action on the ground.

The G8 has to increasingly broaden to encompass the
influential emerging economies now outside but that
account for more than a third of the world's economic
output.

Financial disruption in one country can now affect all
countries. The IMF should be transformed with a
renewed mandate that goes far beyond crisis management
to crisis prevention - not only responsible in the
manner of an independent central bank for the
independent surveillance of the world economy but
becoming its early warning system.

END Quote

LEBARON

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