October 17, 2008 / 1:08 AM / in 9 years

Canada, France seek overhaul of financial system

QUEBEC CITY (Reuters) - Capitalism must be better regulated to prevent future financial crises, Canadian Prime Minister Stephen Harper said on Friday after meeting French President Nicolas Sarkozy.

<p>France's President Nicolas Sarkozy (L) walks Governor General of Canada Michaelle Jean (2nd L), Canada's Prime Minister Stephen Harper (2nd R) and European Commission President Jose Manuel Barroso (R) before the start of a meeting at the Citadelle in Quebec City October 17, 2008. REUTERS/Christinne Muschi</p>

The two men, along with European Commission President Jose Manuel Barroso, agreed on the need to hold an international summit before the end of the year “to restore confidence and the normal functioning of the financial system”.

They met a day ahead of talks that Sarkozy and Barroso will hold with U.S. President George W. Bush at Camp David in Maryland.

“Clearly in the world of globalization, our institutions and our capacity to act have not kept up with other developments, and we’re seeing some of the consequences of that, and we have to have new infrastructure,” Harper told a news conference with Sarkozy and Barroso.

“It’s not to say capitalism is flawed, it’s to say that governments have a responsibility to create a better infrastructure for the establishment of markets internationally,” he said.

Sarkozy said a summit is needed to launch an overhaul or “refoundation” of capitalism to become “a capitalism of entrepreneurs, not speculators”. The president rejected the idea that regulation somehow clashed with freedom.

“There is no freedom without a minimum of regulation and supervision,” the conservative leader said, adding the world must ensure the same causes do not produce the same effects.

Sarkozy said he aimed for progress in Quebec and on Saturday with Bush on the date, agenda and attendees of the financial crisis summit.

Harper said a summit date must be set as soon as possible, and Sarkozy again said he preferred it take place before the end of November. Sarkozy said it should include more than the Group of Eight (G8) leading industrialized nations.

“It would seem strange to me to have a summit on financial matters without China, and also strange without India -- in fact, without the G5,” he said, referring to the big five emerging economies of China, India, Mexico, Brazil and South Africa. Sarkozy even suggested an Arab country be invited.

In the prepared text of a later speech to the province of Quebec’s legislature, Sarkozy said the world must be done with “a financial capitalism obsessed with the frenzied search for short-term profit” and reintroduce social and moral responsibility.

“For the crisis in which the world finds itself, unprecedented since the 1930s, is not a technical crisis. It’s a moral crisis,” he said.

In an interview with La Presse newspaper, he said the world should leave behind “the myth of the omnipotence of the markets...We have to find a new equilibrium between the state and the market.”

Harper said in such times it was important to work against protectionism, which exacerbated the Great Depression, and to that end the EU and Canada agreed to launch negotiations on an economic partnership as soon as possible in 2009.

They also decided to conclude a comprehensive air transport agreement by November 30.

“These times call for closer economic cooperation,” Harper said.

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