German Chancellor Angela Merkel said she would push the G20 to make more progress on regulating financial markets and crack down on tax evasion, co-opting signature policy issues of her main challenger in September’s elections.
Merkel, who confronts Social Democratic candidate Peer Steinbrueck in a TV duel today, said she wanted to urge leaders of the G20 top world economies to agree a time frame for steps towards tighter regulation of the so-called “shadow banking” sector.
A key pillar of the campaign of Steinbrueck, who is trailing Merkel badly in opinion polls, has been to denounce what he calls the “dictatorship of financial markets”.
World leaders meet on Thursday and Friday in Russia to negotiate the final piece of their financial crisis regulatory reforms, rules for this sector, an assortment of financial intermediaries such as hedge funds that handle $60 trillion of transactions a year – roughly the same size as the global economy.
“I want us to agree a binding time frame so it is clear when we reach which steps on this,” said Merkel, leader of Germany’s conservatives, in a video podcast yesterday.
“Regulation is still faltering here”.
Steinbrueck, who heads Germany’s centre-left Social Democrats (SPD), has long argued policymakers have not gone far enough in tightening regulation to prevent a repeat of the financial crisis. In 2010, he told Reuters “we do not yet have a legal framework to significantly curtail the shadow banking sector, if not dissolve it.”
G20 should regulate every financial market sector
Merkel said in her podcast Germany would ensure that the G20 continues to tighten regulation of financial markets, recalling its goal “to regulate every financial market actor, every financial product, and every financial centre”.
She added that she expected progress on the issue of tax evasion. “Here we will agree with the most powerful economies on an automatic exchange of information”.
Steinbrueck led a crackdown on tax evasion when he was German finance minister in Merkel’s 2005-2009 ‘grand coalition’ government of conservatives and SPD.
His party helped block an attempt by Merkel’s government last year to sign a bilateral deal with Switzerland that would have imposed taxes on assets stashed by German citizens. The SPD said the deal would have let off tax evaders too easily.
In a poll released earlier this year, over two-thirds of Germans thought Germany did not do enough against tax evasion.