EU Envoy Explains Europe's Stimulus Concerns

European ambassador to the U.S. John Bruton in Washington, D.C.. in April 2008 i i

hide captionJohn Bruton, EU ambassador to the U.S., shown here (leaning forward) in Washington in April 2008, says he expects the world leaders at the G-20 summit in London to talk about bolstering the International Monetary Fund.

Niall Carson/PA Wire
European ambassador to the U.S. John Bruton in Washington, D.C.. in April 2008

John Bruton, EU ambassador to the U.S., shown here (leaning forward) in Washington in April 2008, says he expects the world leaders at the G-20 summit in London to talk about bolstering the International Monetary Fund.

Niall Carson/PA Wire

On the eve of the G-20 meeting of world leaders, President Obama said that the U.S. alone cannot bring the world out of a recession — and he called on European countries to boost stimulus spending.

But last week, the current president of the European Union, Mirek Topolanek of the Czech Republic, called Obama's economic policies "the road to hell."

John Bruton, the EU's ambassador to the United States, tells NPR that the reason for European objections is that borrowing money may be difficult for many of the 27 countries who make up the EU. Some of those countries, like Germany and Britain, are pumping stimulus money into their economies. But others, like Ireland, Latvia and Hungary, are paying higher interest rates to borrow — if they can borrow — Bruton says.

"It's much easier for the United States, which has the reserve currency, which borrows dollars from itself and from its own people in its own currency," Bruton tells NPR's Melissa Block. "And can re-juice its debts eventually even if the dollar is devalued."

Bruton, who also is the former prime minister of Ireland, says the countries in Europe are either trying to defend a new currency — the euro — or a very small currency.

Another issue that has divided the U.S. and Europe is the question of international regulation, but they are "approaching one another more closely all of the time," Bruton says. He says the U.S. has said it's prepared to move forward on regulating hedge funds and rating agencies, while Europe is further down that road.

"It's very important that we have regulations that we each recognize is adequate for one another's purposes and we don't have to duplicate," Bruton says. "And I think that that's where we're heading in the G-20."

Bruton is careful to say that regulation and supervision, unless they're well-designed, will not resolve the problem. He says the U.S. and Europe need to infuse more money into the International Monetary Fund to help strengthen its balance sheet. Bruton says he thinks that's a decision that will be made at the G-20 summit.

"Another vitally important thing is to put more money into the IMF if we're transferring the debts of private sector banks to the taxpayers and to governments, because we need to, because we need to keep banking going — not because we love bankers," Bruton says. "There may be the risk that the governments will themselves get into financial difficulty. Who's going to help them? The International Monetary Fund. Does the International Monetary Fund have enough money to do that at the moment? No, it doesn't."

As for whether Europe blames the U.S. for the economic crisis, Bruton says there is the sense that the U.S. pioneered the financial system that leverages debt, but that it was embraced by the Europeans.

"Nobody forced any of the European banks who bought securitized assets — nobody forced them to do so," Bruton says. "So we all have to take responsibility. I think blaming one country is completely misplaced and a waste of time. What we've got to do now is deal with the problem going forward into the future. And here, we have a mutual interest."

Police, Protesters Clash Ahead Of G-20 Summit

Protesters and police clashed Wednesday in London in advance of the G-20 economic summit, as demonstrators smashed windows and spray-painted graffiti on buildings in the city's financial district.

Police said protesters vandalized the Royal Bank of Scotland and pelted police with beer cans near the Bank of England. Scotland Yard estimated about 4,000 people were in the crowd after several demonstrations converged on the downtown area.

The Independent, a London newspaper, reported in late editions that 24 arrests were made. Late in the day, police said a man had been reported to have collapsed near one of the protest camps and responding officers were unable to resuscitate him. He was pronounced dead at a hospital. It was unclear if the man was a protester, and the cause of death was under investigation.

As protests died down Wednesday evening, President Obama and other G-20 leaders gathered for a reception with Queen Elizabeth II and then headed to a working dinner at the home of British Prime Minister Gordon Brown.

Obama and his wife, Michelle, were among the first dignitaries to meet the queen. During a private audience, the Obamas gave the queen a personalized iPod with video footage of her visit to Washington, D.C., and Virginia in 2007. They also gave her a songbook signed by composer Richard Rodgers.

"It was a wonderful visit," Obama shouted to reporters as he and his wife left Buckingham Palace. Obama, who has enjoyed a warm reception from Brown, was cheered by several hundred people as he left the royal residence.

Earlier Wednesday, Brown and Obama played down reported differences between leaders, but French President Nicolas Sarkozy and Germany's Chancellor Angela Merkel told a news conference they are concerned about the form new financial regulation will take.

Merkel and Sarkozy want strong oversight for financial institutions, and Sarkozy has threatened to walk out if the summit doesn't yield progress on that front. Merkel said only tighter regulation can prevent another crisis.

While Obama said he, too, wants better regulation, he said he would not accept suggestions for a global regulator. But despite the different expectations, Brown predicted a deal is just hours away.

At the top of the agenda for the G-20 summit is reforming and re-regulating the global financial system to prevent future crisis. Sarkozy and Merkel want a rollback of the light-touch regulating that characterized American and British capitalism.

Obama said he is more interested in fixing the problem than pointing fingers, but he acknowledged that the U.S. bears some responsibility for the global economic downturn.

"If you look at the source of this crisis, the United States certainly has some accounting to do with respect to a regulatory system that was inadequate," he said.

Although Obama has received a warm reception, tensions surrounding the G-20 meeting increased throughout the day.

Chanting "Shame on you," protesters targeted the Royal Bank of Scotland and other businesses in the financial district. The protesters — angry about the bank's heavy losses that led to a government bailout — spray-painted the word "Thieves" on the side of the building.

Elsewhere, protesters pelted police with beer cans, fruit and flour as they tried to storm the Bank of England, Scotland Yard said in a statement.

In preparation for Wednesday's demonstrations — dubbed "Financial Fools Day" by protesters — banks and other businesses in the financial district were warned to board up windows, and employees were told to dress casually to avoid being targeted.

The recession has hit Britain hard. Property values have plummeted and more than 2 million people are unemployed. Like Americans, the British have been outraged by management and compensation issues in the financial sector.

Much of their anger has been directed at the Royal Bank of Scotland, which received a $28.75 billion bailout from the British government. Despite losses of $34.64 billion, former bank CEO Fred Goodwin is receiving a $1 million annual pension for life.

Away from the demonstrations, Obama and Chinese President Hu Jintao agreed to work together to address the economic crisis. The White House said Obama accepted an invitation to visit China later in the year.

Obama also met with Russian President Dmitry Medvedev, with the two agreeing to pursue a deal to cut nuclear warheads and rebuild relations. In a joint statement, the presidents said negotiators will submit their first progress report by July, when Obama will visit Moscow for a summit.

Leaders of 19 key countries and the European Union are gathering in London for the G-20 meeting. Most of the work to come up with a strategy for stabilizing the financial markets is scheduled to take place Thursday.

From NPR and wire service reports

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