Oct 15, 2008, 17:36 GMT
Brussels - British Prime Minister Gordon Brown stole the limelight at a European Union summit in Brussels on Wednesday by proposing new rules for global capitalism.
Despite his reputation as a eurosceptic, fellow EU leaders listened carefully to the former chancellor of the exchequer as he outlined his plans for 'a new Bretton Woods' that would avoid future credit crunches.
'Global financial markets present challenges that no one nation can solve in isolation,' Brown said in a letter distributed to EU heads of state and government in Brussels.
'We must therefore strengthen global cooperation and build a new global financial architecture for the years ahead - a new Bretton Woods which recognizes the globalization of financial risk in the responsibilities of global institutions.'
The Bretton Woods conference of 1944 laid out the foundations of modern-day capitalism by establishing rules for the international monetary and financial order and by creating such bodies as the International Monetary Fund (IMF).
Brown's four-point plan involves 'a global early warning system' to prevent future financial crises from spreading, and 'globally accepted standards of supervision and regulation', effective 'cross- border supervision' of the world's 30 largest multinationals, and 'cooperation and concerted action' at times of crisis.
Such a proposal should be discussed at an urgent global summit with, among others, heads of state and government from the United States, India and China, Brown said.
The first day of the two-day summit in Brussels was largely devoted to discussions on a 2-trillion-euro (2.7-trillion- dollars) European financial rescue plan inspired by a similar initiative launched by Brown in Britain.
Endorsed on Sunday by eurozone leaders in Paris, the plan includes measures to guarantee interbank lending and to partly nationalize shaky financial insitutions by providing them with liquidity in exchange for shares.
Leaders of all 27 EU member states were expected to adopt the eurozone package, with draft conclusions of the summit stating that 'the European Council welcomes the concerted action plan of the euro area countries of October 12, of which it endorses the principles.'
But while there was a shared awareness around the table that common action was essential, some member states arrived at the meeting expressing concerns that the measures approved in Paris may create unfair advantages to some institutions.
'I will clearly want the European Commission's assurances that the planned steps are not a case of disallowed public aid,' said Czech Prime Minister Mirek Topolanek.
Speaking on Tuesday, European Commission President Jose Manuel Barroso appealed to governments to put their divisions aside and sign up to the eurozone's plan.
'Even after this crisis, there are some governments that are opposing a more coordinated European approach,' Barroso said.
'To try and go it alone in this climate would be a fatal mistake for any government anywhere in Europe,' he said.
In Paris, eurozone leaders also agreed to set up a financial crisis management unit tasked with sharing out sensitive financial information among the eurozone's key players and to come up with a rapid, common response.
The unit would comprise governments, the EU presidency, the heads of the European Central Bank and of the European Commission, and the chairman of the eurogroup, Luxembourg's Jean-Claude Juncker.
While in Brussels, EU leaders were set to underline the need to 'strengthen the supervision of the European financial sector', especially with regards to banks and insurance companies operating in several member states.
And with the rescue plan likely to dig deeply into member states' public accounts, EU leaders were set to agree on the need to relax the bloc's strict budgetary rules.
In their final statement, leaders were expected to affirm that the EU's revised Stability and Growth Pact should be applied in a manner 'which reflects the current exceptional circumstances.'
Officials in Brussels say this means that budget deficits would be allowed to exceed by 'several decimal points' the standard 3-per cent-of-gross domestic product (GDP) limit.
Finally, EU leaders were set to call for a curb on managers' salaries.
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