UK, Germany split with US over economy - Emirates24|7

UK, Germany split with US over economy

British Prime Minister Gordon Brown (FILE)

German Chancellor Angela Merkel and British Prime Minister Gordon Brown argued for tougher control of the international economy, opening up a potential split with the United States on ending the financial crisis.

Merkel said a United Nations economic council based on the UN Security Council may have to be created to police the global economy, while Brown said his "shared revolution" would strengthen current international institutions.

Both proposals went counter to US ideas rejecting any global enforcer. At a Group of 20 summit in November, Washington fought for national regulators to take precedence.

Brown and Merkel set out the case for greater international control at the World Economic Forum in Davos, both looking forward to a new G20 summit on the crisis to be held in London in April.

The British prime minister, his concentration broken by his own mobile phone ringing during a press conference, called for "a shared revolution in common action to deal with real problems".

He said leaders had been calling for the past decade for "a global financial institution with proper supervision, with proper accountability and a proper early warning system".

"There is now recognition all around the world that if you have global financial markets… that national supervision is inadequate," said Brown.

The priorities of the G20 meeting would be agreeing "an early warning system of risk on any continent in the world economy" and replacing "the patchwork of current regulation", Brown said.

He would push for "international standards of transparency and disclosure" for financial institutions. "And we need to reform and strengthen international institutions giving them power and resources to invest at global level."

The G20 summit in November tasked finance ministers to draw up recommendations by March 31 to used at the London summit.

Brown said any changes had to be ready "as a matter of urgency".

Merkel said the G20 – which groups the industrialised powers and emerging giants Brazil, China, India and Russia – could eventually agree a global economic charter to enforce new standards when the world comes out of the financial crisis.

Merkel said governments must take firmer control of markets and used her speech to again criticise US subsidies to ailing American car firms which she called a form of "protectionism".

The German chancellor said international leaders must make a commitment to free market forces while ending the market excesses and "irresponsible deeds" that caused the crisis.

She said Germany's social market economy could reconcile both aims with the state as "the guardian of economic and social order".

Brown also vowed not to target an exchange rate for the pound, saying that history has shown the strategy to be flawed.

"We are not targeting the pound," Brown told the World Economic Forum in Davos, Switzerland.

"The history of targeting exchange rates has been a recipe for failure."

The pound this month slumped to its lowest since 1985 against the US dollar as Europe's second-largest economy reels from recession and the government runs up debt.

The United Kingdom was ejected from the European Exchange Rate Mechanism, the precursor to the euro, in 1992 when it failed to prop up the pound against Germany's deutsche mark.

He said that unease about the global financial crisis is no reason to retreat into protectionism and fear.

"This is not like the 1930s. The world can come together," he said. The annual meeting has been overshadowed by the declining health of the global economy and uncertainty about the future.

"This is a global banking crisis and you've got to deal with it for what it is, a global banking crisis," Brown said. Financial protectionism is at present a greater risk than trade protectionism, he said.

Brown said global oversight of the financial services industry, and an overhaul of missions by agencies like the World Bank and IMF is needed.

 

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