European leaders want reform on overseeing markets

BERLIN (Reuters) – European leaders backed oversight of hedge funds on Sunday as part of structural reforms they say are needed to help the world's financial institutions emerge stronger from the global economic crisis.

Short-selling by the secretive hedge fund industry -- selling borrowed stock in the anticipation that the prices will fall -- was blamed by some politicians for exacerbating the banking crisis and economic meltdown.

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Since the last G20 in Washington in November, recessions in Europe and the United States have deepened, forcing governments to push through huge stimulus packages that have rekindled fears of protectionism.

After near daily announcements of cash injections to prop up banks, tide over the auto sector and prevent more Americans losing their homes, Obama is already looking at where the U.S. economy will be after any recovery.

He is expected to unveil a plan to cut the ballooning deficit in half by 2013 with a mix of tax increases on wealthier Americans and spending cuts. Private economists project the deficit will rise to $1.5 trillion this year.

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Up to 100,000 people marched through Dublin on Saturday to protest at government cutbacks, including a pension levy on public sector workers and freeze their pay, brought in to try to stem a ballooning budget deficit.

Greece is not ruling out tax measures to achieve its fiscal targets, its finance minister said, after the EU started disciplinary action over the budget shortfall exceeding the EU ceiling of 3 percent of gross domestic product.

The commerce minister of Iceland, where the government and the banking system collapsed due to the crisis, told a German newspaper debt would rise to the equivalent of one year's gross domestic product in the near term.

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