Regulating away from recovery

At first glance, UK prime minister Gordon Brown's support of the European initiative to regulate the financial sector seems to signal an end to his past support of the light-touch approach he advocated during his years as chancellor of the exchequer.

The news is certainly a welcomed vindication to some German officials, happy to see the Anglo-Saxon model struggle. But how deep can the measures adopted during the last European summit run?

The real impact of the summit remains to be seen, though many are already worried about adverse impacts for the industry. It usually takes member states some time to agree on and implement policies. The situation seems to put those who seek stricter regulation - seen as a must to restore confidence in the markets - at loggerheads with those wanting more fiscal stimulus. Not helpful when recovery is sorely needed.

The Geithner proposal from the US, on the other hand, seems to regulate in a way conducive to buyout houses. It puts forward a framework for public-private partnerships aimed at encouraging private investors in newly renamed "legacy assets", allowing private investors to match funds with TARP money and get leveraged with FDIC. This could bring about a wave of financial services deals, and has some GPs in Europe salivating over the prospects.

Yours sincerely,

Francinia Protti-Alvarez

Editor, Southern Europe unquote"

Tel: +44 20 7004 7476

francinia.protti-alvarez@incisivemedia.com.

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