(Updates after news conference)
By Anna Willard and James Mackenzie
PARIS, Dec 18 (Reuters) - European Union finance officials
on Thursday discussed ways of preventing financial crises of the
kind that have tipped much of the world into recession.
But they appeared to come up with little beyond a commitment
to focus on how to deal with offshore financial centres, how to
spot crises earlier, and where to get more money for the
International Monetary Fund (IMF) to help faltering economies.
"We have decided to explore all options," French Economy
Minister Christine Lagarde said of the search for IMF funding.
No-shows by some key players limited the weight of a meeting
that took place under the shadow of yet more trouble on Wall
Street -- this time an alleged $50-billion fraud that may have
gone undetected by U.S. regulators for as much as a decade.
France, which hands the EU's rotating presidency over to the
Czech Republic at the end of the month, called the gathering to
assess where the EU stands on broader international pledges to
improve regulation of high finance.
European Central Bank President Jean-Claude Trichet attended
the talks, as did Dominique Strauss-Kahn, managing director of
the Washington-based IMF, which is busy bailing out economies
such as Iceland and Hungary and now negotiating with Latvia.
"We are in the last steps of negotiations but we are not yet
there. I hope it will finish as soon as possible," said European
Economic and Monetary Affairs Commissioner Joaquin Almunia.
The meeting comes on the heels of a decision by the U.S.
central bank to cut interest rates to near zero on Tuesday for
the first time in a bid to promote economic activity.
It came the day the ECB announced cuts in the rate it offers
on overnight deposits with it, in what economists see as a move
to encourage commercial banks to take that money back and lend
it to businesses that the credit crunch is starving of cash.
The ECB has cut its key interest rate -- the so-called
refinancing rate -- but not as deeply as its U.S. counterpart.
Trichet refused to comment when asked about that during a
news conference with Lagarde and others after the meeting.
Governments, conscious of the limits of monetary policy in
such hard times, are looking for ways to deliver on promises of
a fiscal stimulus of 200 billion euros ($287 billion) in all at
the EU level.
Lagarde said the stimulus plans being hatched by governments
were worth about 0.85 percent of EU gross domestic product at
the last count and that foregone tax receipts and the subsequent
rise in deficits was worth another 1.5 percent of GDP, giving a
grand total of 2.25 percent.
ABSENT
Key no-shows in Paris included German Finance Minister Peer
Steinbrueck, Britain's Alistair Darling and Jean-Claude Juncker
of Luxembourg, who serves as chairman of the euro currency zone.
Steinbrueck and Darling were kept away by budget discussions
back home, Lagarde said.
Another notable absence was the Czech finance minister,
whose country will lead EU policy deliberations for the first
half of 2009 as holder of the bloc's presidency.
France has convened several emergency EU summits to thrash
out a European response to what is seen as the worst financial
crisis since the Wall Street crash of 1929.
The response included decisions to spend billions bailing
out banks hit by the credit crunch.
The G20 group of advanced and large developing economies
agreed in November on measures to change the way international
financial institutions work so as to prevent a repeat of the
crisis. It set March 31, 2009, ahead of its April summit, as a
deadline for tangible follow-up to its pledges.
Wall Street's latest scandal, which leaves many European
banks and investors exposed, served as a timely reminder of how
hard financial regulators and supervisors find the job.
Disgraced Wall Street investment manager Bernard Madoff was
placed under house arrest on Wednesday, accused of orchestrating
a $50-billion fraud.
The scandal prompted a mea culpa this week from the SEC
Chairman Christopher Cos acknowledging the regulator agency had
failed to act on tips about alleged fraud by Madoff over almost
a decade.
"It is clearly an example of what we must absolutely avoid
in the future," Lagarde said, adding Madoff operated "at the
margins of a system which was not properly monitored and for
which the regulation was not appropriate".
U.S. President-elect Barack Obama signalled what Europe
hopes will amount to a shift towards greater cooperation on
regulation at international level, saying U.S. regulators had
"dropped the ball" and that the Madoff scandal showed how badly
regulatory reform was needed.
(Additional reporting by Huw Jones, Tamora Vidaillet, Francois
Murphy, Brian Rohan and Crispian Balmer in Paris and Paul Carrel
in Berlin; Writing by Brian Love; Editing by Janet Lawrence)
