The FINANCIAL -- According to EU business, EU finance ministers will focus on the stability of the financial system next week amid divisions about how best to return calm to the markets.
Financial market turmoil and the impact on the economy will be in focus when eurozone finance chiefs meet on January 21 and when they are joined by colleagues from the rest of the European Union on January 22.
Despite broad agreement that something must be done, Europe is struggling not only to agree whether more oversight and regulation is needed but even in what format action should be discussed.
Some small eurozone countries such as Belgium and Finland are frustrated that Britain, France, Germany and Italy have taken the initiative to hold top level meetings on such problems in the absence of their other EU partners.
After a meeting with her British, German and Italian counterparts on January 17, French Finance Minister Christine Lagarde said further turmoil still posed a risk although markets "are currently in a process of gradual recovery."
Crisis in the US housing loan market has sent shockwaves through Europe, causing banks to become much more cautious about lending to each other and focusing minds on stepping up European oversight of the financial sector.
EU Economic and Monetary Affairs Commissioner Joaquin Almunia warned January 17 against rising risks weighing on the outlook for the eurozone's economic growth in 2008.
"Tighter financing conditions, reduced confidence in the aftermath of the financial market turmoil, rising inflation as well as a cooling-off of the global environment will weigh on euro-area growth in the coming quarters," he said.
On January 21, Italian Finance Minister Tommaso Padoa-Schioppa is due to develop plans for more cooperation among national financial sector regulators and a common European rulebook for financial institutions, an official said.
Currently, regulation of Europe's banking, financial and insurance markets remains largely managed by national authorities, leaving big cross-border institutions to juggle a patchwork of rules and overseers.
Amid divisions about how fast and far to move forward on EU-wide financial sector supervision, ministers agreed in December to keep tabs on efforts to improve supervisory cooperation.
However, British Chancellor of the Exchequer Alistair Darling has warned of the dangers of over-regulating as an answer to financial market turbulence.
In addition to discussing financial stability, EU ministers are on January 22 also to meet with recently-appointed IMF chief Dominique Strauss-Kahn to discuss reform, a senior EU official said.
They will also discuss European contributions for an upcoming meeting of finance chiefs from the Group of Seven richest countries in Tokyo on February 9.