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EU leaders agree on regulatory reform

Source: Reuters - Thu 2th Jul 2009

European Union leaders agreed on Thursday to tighten financial supervision and create pan-European watchdogs to help prevent another global economic crisis.

EU diplomats said the leaders reached agreement in principle in Brussels, where they also unanimously agreed to support Jose Manuel Barroso's bid for a second five-year term as president of he EU's executive European Commission.

The agreement, at a summit intended to show the EU can control the crisis, followed U.S. President Barack Obama's announcement on Wednesday of what he called the most sweeping reform of U.S. financial supervision since the 1930s.

"We agreed that we intend to continue our fight against the global economic crisis...We need the right institutional framework for that" Czech Prime Minister Jan Fischer, whose country holds the EU's collective presidency, told reporters.

Final agreement will be announced on Friday, the second and final day of talks, the diplomats said.

The financial supervisory proposals involve creating three pan-European regulatory bodies next year to ensure countries introduce new rules on supervision, and a new European Systemic Risk Board that would monitor risks to stability.

EU sources said agreement was reached after the leaders addressed concerns over some aspects of the reforms by London, Europe's biggest financial centre.

Britain had feared its national regulator would lose its power to steer the financial services sector, which is crucial to its economy, and opposed plans for the European Central Bank to run the European Systemic Risk Board permanently. 

The sources said the leaders had agreed the new pan-European authorities would have the power to make binding decisions on cross-border disputes, provided they did not tell governments how to spend fiscal receipts for example to bail out a bank.


Barroso, a former Portuguese prime minister, set out his plans to the EU leaders over dinner.

"We want to have a strong president, a strong partner who communicates well" Fischer said. "I am very glad that Jose Manuel Barroso received unanimous support."

Barroso, 53, still needs the European Parliament's approval next month and a more formal endorsement by the EU leaders. But his centre-right allies are the biggest force in the assembly and he is expected to win enough votes to be reappointed.

A record-low turnout in an election to the parliament this month showed widespread discontent with the EU's handling of the economic crisis under Barroso, but he represents continuity in fighting problems such as soaring unemployment.

Barroso has said he wants to lead Europe out of crisis, rebuild the EU's financial and supervisory system, protect jobs, combat climate change and help secure Irish voters' approval of the Lisbon treaty streamlining EU decision making.

"Our citizens want to see action" he told reporters.

The leaders hoped to agree on steps to help the Irish government win voters' backing for the Lisbon treaty, which they rejected in a referendum last June. 

Diplomats said final discussions on this had been put back to Friday, signalling problems in reaching agreement on legal guarantees that the treaty would not affect Irish policies on military neutrality, abortion and taxation.

Agreement would pave the way for a new referendum, which Dublin would be likely to hold by early October.

The leaders also agreed the basis of its financial contribution to a global climate change deal which will be sought at global talks in Copenhagen in December. They did not say how much it would amount to.

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