EU sees calls for more regulation boosted by Obama

(BRUSSELS) - Barack Obama's US election victory has revived European hopes for deep reform of the global financial system, but EU leaders will first have to bridge their divergences before pushing for drastic change.

The European Union, under its current French presidency, has led calls for a broad overhaul of global financial architecture, which it hopes will be launched at an international summit in Washington on November 15.

In preparation for that gathering, EU leaders will meet Friday in Brussels to hammer out a common position for the Washington summit, which will bring together the 20 most powerful economic nations.

While the outgoing US administration has shown little enthusiasm for EU calls for tougher regulation of global finance, European leaders are hoping that US president-elect Obama will be more receptive.

"I hope that he will be on the same lines as ours ... that he will be aware of the necessity for more oversight, responsibility and transparency in the financial world," said French Finance Minister Christine Lagarde.

Obama has indicated he is open to more regulation, arguing on Tuesday in an opinion piece in the Wall Street Journal that four more years with a "complete lack of regulatory oversight" was not possible.

In contrast, US officials in the outgoing administration have appeared to resist European calls for expanding the International Monetary Fund's role or building new international financial institutions to prevent, or cope with, future crises.

"It's hard to imagine something that radical unless you were saying you wanted to blow up the existing institutions and start from scratch," a US official said in Washington on condition of anonymity.

Even if Obama is more receptive to European calls for tougher oversight, the November 15 summit is probably too early for him to have a big influence, with his presence at the meeting yet to be confirmed.

The White House had said -- before the November 4 election that swept Obama into history as the first black US president-elect -- that he would likely not play a direct role in the summit in Washington.

But a senior aide to US President George W. Bush, speaking on condition of anonymity, told reporters Wednesday the situation was not so clear-cut and that "it will be up to the president-elect as to how he would like to have input."

European governments, which broadly agree that the financial architecture needs a stiff dose of tougher regulation, want rapid progress on reforms before the whole process gets bogged down in international bickering.

The European Union's French presidency wants "concrete" proposals for reforming the financial system within 100 days of the Washington summit, according to a document the EU leaders are to discuss.

"The summit should set the immediate guidelines for international governance (and) draft a precise work programme so that concrete and operational proposals can be presented with 100 days," says the text, according to an EU official.

The French EU presidency has drafted a separate set of proposals for the bloc's leaders to consider on Friday, ranging from greater oversight to increasing the role of the International Monetary Fund.

Although EU finance ministers "found a convergence of views" on the proposals at a meeting on Tuesday, there were some differences over the details of the plan.

Since then, Paris has revised some of the proposals, in particular recommending that the IMF be transformed into "the prime organization responsible for world financial stability."

The document retains other proposals for regulatory oversight of credit rating agencies, convergence between international accounting standards and limits on bankers' bonuses to take risks into account.

It also calls for actions to ensure that no financial institution, market or jurisdiction falls outside of regulators' reach.