Britain, France discuss US defence move, hedge funds (CORRECTION )

Mar 13, 2010, 12:28 GMT

   London - Britain and France Friday accused the US of 'protectionism' over the collapse earlier this week of a joint US-European bid for a major defence contract.

British Prime Minister Gordon Brown and French President Nicolas Sarkozy said they were 'disappointed' at the decision to end a partnership bid between Europe's EADS aerospace giant and a leading US defence firm to build aerial refuellers for the US Air Force.

'This is no way for the US to treat its European allies,' Sarkozy said, accusing the US of 'setting the wrong example of protectionism.'

Brown said Britain, which believed in open competition and a free market, had expressed its disappointment to the White House.

   The US decision earlier this week leaves rival Boeing as the sole bidder for the contract, worth 35 billion dollars.

   During their talks over lunch in Downing Street, the two leaders also discussed European Union (EU) plans to regulate hedge funds and private equity, a tax on international banking transactions and the German-inspired idea of setting up a European Monetary Fund (EMF).

   However, both Brown and Sarkozy made clear that they were not in agreement on the vexed issue of tighter hedge fund regulation, which Britain feels could harm the interests of the City, London's financial centre.

   Hedge funds needed to be regulated, said Sarkozy, adding that he understood that Brown should 'defend the interests of the City' just as he defended the 'economic interests of France.'

   'We have not reached equilibrium yet,' said Sarkozy. Brown said the people of Europe wanted more transparency in the financial sector and he hoped that a solution could be found in the next few days.

   Brown was cool on the idea of a European Monetary Fund to bail out troubled Eurozone economies, saying that existing arrangements and institutions should be used first to deal with deficit problems.

   Sarkozy added that he was 'always open to new ideas' and believed that the Eurozone had to 'show solidarity' among its members.

   The French president was later due to have talks with David Cameron, the leader of Britain's opposition Conservative Party, which last year pulled out of the European People's Party (EPP), the main centre-right grouping in the European parliament.

   Asked whether he would urge Cameron to rejoin the EPP, Sarkozy said he had 'enough problems at home' to become involved in those of other countries and political parties.

   The French president angrily rejected as 'ridiculous rumours' recent reports of alleged strains in his marriage with former model Carla Bruni-Sarkozy, which had been picked up in the British press.