Brown struggles to swing EU into co-ordinated action

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BRITISH PLANS for international financial reforms, including controls over the hedge funds blamed for much of the recent market turbulence, were outlined yesterday as European finance ministers rejected calls for further co-ordinated cuts in interest rates.

Although the European Union finance ministers' meeting in Luxembourg agreed on the need for Europe to provide leadership in the current economic crisis, there was little sign of a consensus.

Gordon Brown, the Chancellor, held discussions with the French finance minister and the president of Germany's Bundesbank before yesterday's meeting in a bid to win backing for his plans.

Mr Brown yesterday went on to present more detail of the proposals, which are designed to shore up the global economy against shocks of the kind experienced recently.

The proposals include:

More transparency and regulation in both the public and private sectors. This would include codes of conduct covering both sectors, including measures to regulate the speculative hedge funds blamed for some of the recent economic turbulence;

Greater global co-ordination of supervisory and regulatory authorities:

New arrangements for resolving crises, including reforms to the International Monetary Fund. These, Mr Brown said, would involve "the private sector paying its share of the costs".

The Chancellor recognises that he needs the support of his counterparts in Europe before he can hope to gain the backing of the United States.

Other EU ministers yesterday gave the ideas a mixed reception, but were unenthusiastic about a succession of hints from Mr Brown that interest rates should be reduced further.

Ireland's finance minister, Charlie McCreevy, speaking to reporters before the meeting of finance ministers, said he agreed with the Bundesbank president, Hans Tietmeyer, that interest rates in the core countries of the EU were low enough, especially compared with US rates.

The finance ministers agreed to aim for budgets in balance or surplus "no later than the end of 2002".

Meanwhile, the US Congress has reached tentative agreement with the White House on terms that could release $18bn for the IMF. President Clinton had undertaken to make the sum available to relieve the pressure from the crises in Asia and Russia. The Republican-majority Congress, however, insisted that the IMF accept reforms before it would approve the money.

The agreement drafted yesterday would require the IMF to lend at above- market rates to countries in crisis, and demand repayment in 30 months.