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European leaders from the Group of 20 states, meeting in Berlin to discuss the global crisis, may press banks to ditch “short-term interests” by setting aside more funds for lean times and curbing their system of bonuses.

“Banks must act in the long-term interests of their shareholders and therefore of the economy as a whole, not in the short-term interests of bankers,” U.K. Prime Minister Gordon Brown said in a commentary published today in Britain’s Observer newspaper before attending the talks in Berlin. “That has to be the foundation on which a new system must be based. This starts with a rejection of the old short-term bonus culture.”

Banking rules are one of the topics to be discussed at today’s meeting being hosted by Chancellor Angela Merkel with leaders including French President Nicolas Sarkozy and Italian Prime Minister Silvio Berlusconi. Also on the agenda are mounting financial problems for eastern Europe; tax havens; protectionism; and the role of the International Monetary Fund.

Europe’s G-20 leaders plus European Central Bank President Jean-Claude Trichet and Bank of England Governor Mervyn King will explore how to compel lenders to increase capital reserves in periods of faster economic growth, said German Deputy Finance Minister Joerg Asmussen who helped draft the program.

Banks Must Save

“Business policy by banks is part of this crisis,” Asmussen told reporters in Berlin Feb. 20. “We need to agree means, probably by augmenting Basel II banking rules, to force them to save for when economies cool.”

“We want to make sure that in future there will be no blind spots on the world map when it comes to financial-market products, market participants and instruments,” Merkel said yesterday in her weekly podcast.

Merkel has said she wants a united European response to the deepening recession to present at a full session of the G-20 in London in April to be attended by President Barack Obama on his first trip to Europe since taking office. The G-20 groups the major industrialized and developing countries, including China, Brazil and India.

“European leaders are coming to this meeting with differences over things such as fiscal stimulus and future regulatory steps,” Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, said in a phone interview. “Do Merkel, Sarkozy and Brown want to go the London G-20 summit as just national leaders, or representing a common European position?”

G-20 London Summit

The meeting will build on the results of the G-20 summit in Washington in November, which drew up 47 points for action to overhaul the global financial system in the wake of the crisis that has triggered a global recession.

That “unusually concrete communique calling for a seamless control of financial markets means we need to draw all the steps together quickly,” Asmussen said.

German Finance Minister Peer Steinbrueck, in a position paper for the Berlin meeting e-mailed by his Ministry yesterday, sets out five areas for discussion lowest fee payday loans. These include greater transparency and accountability; reform of international institutions such as the IMF, World Bank and Financial Stability Forum; promoting “integrity” in financial markets; and enhancing “sound regulation.”

Steinbrueck calls for “a commitment by G-20 members to implement a global charter of regulatory and supervisory principles.” He adds that “all significant entities” in financial markets “should be submitted to appropriate regulations.”

EU Bailouts

The paper makes no mention of bailing out fellow European Union members in financial difficulty. Steinbrueck raised the matter on Feb. 18 when he said that European governments may be forced to contemplate the bailout of entire nations, in contrast to EU rules which don’t require such action.

ECB Executive Board Member Lorenzo Bini Smaghi weighed in to the debate yesterday, saying that current rules permit the EU “as a whole” to aid a member state in “economic difficulty.”

The World Bank warned Feb. 20 that the economies of the European Union’s eastern members, once the “great success” of the 27-member bloc, are being pummeled by plunging exports to the west, faltering foreign investment and a lack of bank credit.

Brown said Feb. 19 that the G-20 and the European Bank for Reconstruction and Development should look at ways to help eastern European countries tackle the financial crisis.

‘Not Enough’

“Governments are having to take action to stabilize the financial system and nations acting alone will not be enough,” Brown said.

The EU plans to hold a special summit on March 1 to coordinate national responses to the economic crisis.

“The situation in many member states is worrying me, and I feel we need to give the highest political attention to our common fight in the crisis,” Czech Prime Minister Mirek Topolanek, whose country holds the EU’s rotating presidency, told reporters in Brussels earlier this month.

Eastern Europe’s economies are slowing at a much faster pace than forecast as exports to the EU slump and investors flee from risky countries, putting pressure on currencies, bonds and other assets. Countries including Hungary and Ukraine have sought IMF loans to prop up their economies.

New York University economist Nouriel Roubini said that Europe’s banking system faces growing risks because of losses in the region’s emerging markets, and the crisis may require a region-wide rescue effort.

“The banking problem in Europe is becoming more severe,” Roubini said in a Feb. 20 Bloomberg Television interview. “You have a series of countries that are really in trouble,” Roubini said, citing Latvia, Estonia, Lithuania, Hungary, Belarus and Ukraine.

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