Financial Regulatory Forum

UK, France seek ways to curb oil price volatility, end tax havens

July 6, 2009

  By Estelle Shirbon 
  EVIAN, France, July 6 (Reuters) – France and Britain called for action to curtail oil price volatility on Monday as part of a move towards tougher global governance to prevent a return to economic problems that existed before the financial crisis.   Speaking at a Franco-British summit ahead of a meeting of G8 leaders in Italy this week, British Prime Minister Gordon Brown also said that tax havens should accelerate their reforms towards greater transparency for the good of the world economy.
   “The world should be in no doubt that the writing is on the wall for tax havens wherever they may be,” Brown said at a joint news conference with French President Nicolas Sarkozy.
   “We are calling today for a March 2010 deadline for the introduction of sanctions against tax havens, sanctions that could include revising investment policies,” Brown said.
   Sarkozy said France and Britain would publish a joint position on the issue of oil price volatility in coming days.
   “We must, with the fossil fuel producing countries, try and stabilise the oil price in a reasonable range, neither too high nor too low,” Sarkozy said.
   “The world will not recover from these yo-yo effects that take us from one excess to another. There too, states must try to take a leading role and reintroduce some transparency and regulation,” he said. 

   Brown said that producer and consumer countries should together study the oil market mechanisms that caused price swings and determine whether there was any “undue speculation.” If there was, countries should be prepared to take action.
   “We will have to have discussions with the Saudis and with OPEC. We will have to have discussions with our other partners within the G8 and the G20 … to understand what the demand will be in the future, what the supply will be,” he said.
   
   “WARNING SIGNALS”
   The two leaders called for concrete decisions on regulation at the next meeting of G20 leaders in Pittsburgh in September, and more efforts in Europe to ensure a strong economic recovery.
   Brown urged the G8 and G20 meetings ahead to “take seriously some of the warning signals that exist in the world economy”.
   “We have to increase bank lending and both of us are worried that banks have yet to respond in full to the situation that we have where industries and sectors are calling for help for the banks,” Brown said.
   European Central Bank President Jean-Claude Trichet has warned that rising deficits due to spending on stimulus plans to boost the economy risked undermining confidence.
   But Sarkozy, who has announced a plan to boost investment spending, said the best remedy for debt and deficits was strong growth and he would push some countries to do more.
   “We cannot allow ourselves several years of dull growth. I also share Gordon’s Brown’s analysis that we need an even stronger economic strategy in Europe, with more coordination. 
   “Of course we have to fight against debt, of course we have to fight against the deficit, but we will fight against debt and deficit by bringing back growth and by operational savings.
   “If there is no return to growth, there will be no return to balance. So both of us have to fight to push the countries that can to do more,” Sarkozy said.
   He also warned against a return to the “crazy” pay practices that were current in banks before the financial crisis.
   “These crazy remuneration levels — the more you speculated, the more you were paid…we won’t accept it,” he said. (Additional reporting by James Mackenzie, Anna Willard and Crispian Balmer; editing by James Jukwey/Toby Chopra)

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