PARIS – Tomorrow, for the second time in only five months, the leaders of the world’s top 20 economies will meet to seek a joint response to the unprecedented global economic crisis.
Since this crisis began, I have argued that when we are faced by a challenge of this magnitude, cooperation is a necessity, not an option. In September, I called upon the world to rally together with a response based on coordination and cooperation. Brought forward in concert by the European nations, that initiative led to November’s Group of 20 meeting in Washington, where we laid the foundations for far-reaching reform of the international financial system. Tomorrow’s summit must enable us to put into practice the principles we established.
The world expects that we will speed up the reform of the international financial system and rebuild, together, a better-regulated form of capitalism with a greater sense of morality and solidarity. This is a precondition for mobilizing the global economy and achieving sustainable growth. This crisis is not a crisis of capitalism but the breakdown of a system that drifted away from capitalism’s most fundamental values.
In November, we agreed on four principles that would guide our response: enhanced coordination and cooperation; the rejection of protectionist measures; the strengthening of regulatory systems in financial markets; and a new global governance.
On the first two points, we have made a good deal of progress. We have managed to hold off the specter of protectionism, and many nations have injected massive support for their economies, undertaking ambitious stimulus programs. Countries that offer their citizens a high level of social protection, such as France, have also significantly increased their levels of crisis-related welfare spending. Overall, the world’s leading economies have made comparably gigantic efforts to combat the crisis.
These measures are beginning to take effect and produce tangible benefits, but we must be ready to do even more if circumstances require it. I plan to defend this principle in London: We must do everything necessary for world growth.
This week we must attach the same sense of urgency to the regulation of financial markets. World growth will be all the stronger for being sustained by a stable, efficient financial system and by the kind of renewed confidence in the markets that would enable resources to be better allocated, encourage lending to pick up again and foster the return of private investment capital to developing countries.
We agreed in November that not one financial player, institution or product could be beyond the control of a regulatory authority. This rule must be applied to credit rating agencies, speculative investment funds and tax havens. On the latter point, I want us to go far indeed, adopting a resolution that identifies tax havens and that details the changes we expect from them and the consequences should they fail to respond. The debate on tax havens initiated by the Washington summit has begun to bear fruit, particularly in Europe.
We must reform the required disclosure standards and levels of prudential oversight for financial firms. Sadly, in many countries, this issue has not been getting the attention it deserves.
As we make progress toward reforming global economic governance, we must offer much more space to emerging nations, in keeping with their real weight and the responsibilities they should take on. This holds true for all international bodies, especially international financial institutions. While I am particularly pleased by the expanded membership of the Financial Stability Forum, we must go even further.
Over the coming months, we must pursue a process of renewal throughout the entire multilateral system. In the short term, we must help those who have been hit hardest by the crisis. A good start would be raising the level of funding we make available to the International Monetary Fund. At the European Union level, I have taken up the question of our contribution to the IMF and have found the member states ready and willing. I have also taken up at the E.U. level the question of our contribution to the risks to which certain countries in Central and Eastern Europe are exposed; again, the E.U. member states have been ready and willing.
It is necessary to offer support to the poorer nations falling victim to this crisis. If we do not show solidarity, some risk seeing their considerable efforts toward achieving the millennium development goals nullified. While in Africa last month, I stated my belief that the destinies of Europe and Africa are inextricably linked. We must be ready and willing to stand by Africa and all developing nations that are in difficulty, on every continent.
I remain convinced that the world can emerge from these troubled times stronger, more united and with a greater sense of solidarity, provided we have the will to do so. We cannot achieve radical change overnight, and much remains to be done. We may need future meetings to implement the reforms undertaken in London. I am certain of two additional things: We must achieve practical results beginning with tomorrow’s summit. And failure is not an option.
The writer is president of France.