(Updates with leaders arriving, adds background)
By Matt Falloon and Francesca Piscioneri
BERLIN, Feb 22 (Reuters) - European leaders met in Berlin on
Sunday to agree a common stance on overhauling global financial
rules but their summit risked being overshadowed by concerns
about the fragility of euro zone and eastern European states.
The host, German Chancellor Angela Merkel, wants the meeting
to reaffirm a commitment to free trade, stronger regulation of
financial markets and coordinated action to shield the bloc from
the worst downturn in the postwar era. []
European countries would then take this message of unity to
a broader summit of G20 nations in London on April 2, showing
they are serious about delivering on an action plan agreed last
November in Washington to combat the financial crisis and guard
against future meltdowns. []
But new tensions within the single currency bloc and the
financial woes of European Union members to the east have cast a
cloud over the meeting in the German capital.
Ahead of the gathering, the IMF threw its weight behind the
idea of a common European bond to alleviate pressure on euro
states such as Ireland and Greece that are being forced to pay
hefty premiums over stronger bloc members to finance their debt.
In eastern Europe, the currencies of countries such as
Poland, the Czech Republic and Hungary have come under severe
pressure, hitting millions across the region who have borrowed
in foreign currencies such as the euro.
Germany, Europe's benchmark issuer of debt, has rejected
this idea of a euro-zone bond and Merkel is keen not to let the
issue hijack her summit with the leaders of Britain, France,
Italy, Spain, the Netherlands, Czech Republic and Luxembourg.
All the leaders, the president of the European Commission
and finance ministers and central bankers had arrived at
Merkel's Chancellery by 1030 GMT and are due to hold a joint
news conference at 1345 GMT.
In an interview with top-selling German newspaper Bild to be
published on Monday, Italian Prime Minister Silvio Berlusconi
highlighted a problem within the 10-year old currency bloc as it
works to coordinate a response to the crisis.
"Europe suffers from anachronisms -- for example the fact
that it was born as a monetary union but still lacks a political
dimension," Berlusconi said. "The only tools to face the crisis
are monetary."
Since the G20 summit in Washington late last year,
recessions in Europe and the United States have deepened,
forcing governments to push through massive stimulus packages.
The Berlin meeting takes place after a week of accusations
of protectionism between European nations, with some of France's
partners objecting to its plans to offer 6 billion euros ($7.6
billion) in state loans to domestic carmakers.
Ahead of the meeting, German officials acknowledged that
differences also existed with Britain over how strictly to
regulate hedge funds.
Agreement is expected on giving the International Monetary
Fund and Financial Stability Forum, a body of central bankers,
regulators and finance minister, new responsibilities for
overseeing financial reforms and boosting the funds of the IMF.
(Additional reporting by Kerstin Gehmlich; Writing by Noah
Barkin)
