European Union leaders on Friday laid out the welcome mat to sovereign wealth funds to invest in the bloc, as they met in Brussels with dark economic clouds gathering on the other side of the Atlantic.
With news of the collapse in confidence in Bear Stearns filtering into the Brussels’ summit room, EU leaders waved through a communiqué stressing that Europe would remain open to investment from state-owned investment funds.
Gordon Brown, British prime minister, said it was vital that Europe kept its borders open to investment at a time of increasing economic uncertainty, warning that “the situation in America has deteriorated in recent weeks”.
Mr Brown welcomed the adoption of an essentially free market paper by the European Commission, which says that sovereign wealth funds have “so far played a very useful role” as capital and liquidity providers.
However the EU stressed that the funds – operated by countries including China and the oil rich Gulf states – had to be more transparent over their investment strategy and objectives.
Mr Brown carried the mantra of “stability” – repeated more than 20 times by Alistair Darling during last week’s Budget – to Brussels, arguing that Europe was facing its most “turbulent” period in recent times.
As well as banging the drum for an “open Europe”, Mr Brown was also reported by Commission officials to be pushing hard for tough action on climate change, putting him at odds with Angela Merkel, German chancellor, over the treatment of heavy industry under the EU’s emissions trading scheme. “We had Brown on one side and Merkel on the other,” said one European Commission official.
“We were in the middle.” Mr Brown also surprisingly won agreement for his proposal – presented to European leaders with less than 48 hours notice – for the Commission to consider whether reduced rates of VAT could play a role in boosting demand for “green products”, such as low energy white goods and insulation materials.
The idea was initially rejected by the Slovene EU presidency. But as newspaper headlines proclaiming a “humiliating defeat” for Mr Brown were being prepared, the idea was slipped into the final communiqué.
Any European regime for reduced VAT rates below the agreed minimum – 15 per cent – has to be agreed unanimously by all 27 EU member states. Some countries like Germany oppose variable rates in principle, preferring a single European system.