The debate over the aims and goals of April’s London Summit has ratcheted up several gears across Europe in the wake of the meeting of the leaders of six of the largest European Union member states last weekend.

The summary of the discussion published by Angela Merkel, the chair of the meeting, has sparked a fierce debate among European commentators and media over the implications of the meeting’s conclusions for both Europe and the London Summit itself.

The wide-ranging summary included:

• all financial markets, products and participants must be subject to appropriate oversight or regulation including ‘private pools of capital… and hedge funds’;
• credit rating agencies should be subject to mandatory registration and oversight;
• reforms to ensure that banks build additional buffers of resources in good times;
• the development of an effective early warning system by the International Monetary Fund and Financial Stability Forum;
• enlargement of the FSF to include emerging market economies and be implemented swiftly ‘in good time’ before the London Summit.

For some commentators, such as the UK’s Financial Times, the summit was a sign that the EU was finally ‘pulling together [but] not before time’. In its main editorial on 24 February, it said that the leaders had ‘made a genuine effort to forge a common policy in advance of the group of 20 meeting in London in April’. However it added that some of the details were ‘nebulous’ and some disagreements remain in key areas. ‘France wants to regulate hedge funds while Britain, home to most of Europe’s hedge fund industry, talks more about cracking down in tax havens,’ it said. The International Herald Tribune, sees the decision to regulate hedge funds as a victory for France and Germany, over the UK's reluctance to regulate.

In France Le Parisien picked up this point. It concluded that though the European leaders 'acted as if they were all in agreement', they made little progress. The article goes on suggest that Paris suspects London of ‘sidestepping certain issues in order to protect the City’

La Tribune describes comments that, whilst the summit would appear to indicate UK Gordon Brown giving in to Paris & Berlin's plan,the devil is hidden in the detail. Clearly the measures on hedge funds – agreed in the plan - still give the British significant room for manoeuvre.  The paper goes on to conclude that EU Leaders appeared united against protectionism, vowing to keep competition open, thereby sending a clear signal to other advanced economy members of the G20 to do the same.

On a more positive note Handelsblatt, the German business daily, says that a number of major developing countries, including Brazil and China, support plans for a new financial market architecture proposed by the European members of the G20. And in an editorial in The Times in the UK on 23 February said that EU leaders, and especially Britain, needed to strengthen ties with Germany. ‘Mr Brown should build on the Berlin meeting to remind the Cabinet that Germany is, and must remain, a vital ally for everyone in Europe,’ it said.

This discussion can only intensify over the coming days. On 25 February the De Larosiere Group, led by Jacques de Larosière, a former managing director at the International Monetary Fund, will present concrete proposals on reform of regulation of financial institutions to the European Commission. Analysts believe that he could call for a tightening of regulations and even for a single European regulator, which would run counter to the policies of member states such as the UK

Even the Commission acknowledges that there are splits within Europe over this issue. On 2 February Charlie McCreevy, the Internal Markets Commissioner said that the status quo was not an option and that ‘bold steps’ were needed, ”but there are very different ideas on how to go about it. He goes on to accuse member states of saying one thing an doing the other commenting that “While Member State governments are pretty well unanimous that the issue needs to be addressed the fact is that any time over the past decade when proposals - however modest - have been put forward to address them the consensus breaks down.’

The Larosiere report is likely to be high on the agenda at the informal European Council that will be convened in Brussels on 1 March. This Summit was called by European Council President Mirek Topolánek, the prime minister of the Czech Republic ‘to ensure coordination and solidarity within the EU in tackling the crisis. The outcome will be a vital contribution to preparing the ground for the Spring European Council on 19 and 20 March 2009 in Brussels – just 13 days before the London Summit.

Gordon Brown then travels to the United States next week to discuss the world economy with President Obama at a meeting on 3 March. He is likely to be the first EU leader to meet with Mr Obama and will be in a position to lay out the European position to him.