Several member states consider that Europe must play either a direct or indirect driving role in defining new rules at world level for the management and working of the financial markets and currencies. The European Parliament and the European Commission seem, in principle, to agree with this. The member state that is to preside the G8 (which should in the meantime have become a G14) next year has announced that it will launch the idea of a new Bretton Woods. These intentions and guidelines will be discussed at the meeting this Saturday in Paris between the heads of state and government of the four EU countries that are part of the G8, with the participation of the president of the European Central Bank, Jean-Claude Trichet, the president of the European Commission, José Manuel Barroso, and the president of the Eurogroup, Jean-Claude Juncker. Immediate policies and initiatives aimed at facing up to the crisis will be at the heart of the discussion (see following pages) but there will also be consideration of what the lies ahead.
Proposals to enlarged G8. The ideas that Nicolas Sarkozy had launched last week when speaking in New York in his capacity as president-in-office of the European Council, were specified and confirmed by the soon-to-be president of the G8, Giulio Tremonti. It is no longer an indiscretion, it is an announcement. Nicolas Sarkozy had suggested that, before the end of the year, he should meet the leaders of the countries most concerned (including China and other emerging giants) with the participation of those responsible for the major international financial institutions. And he had spoken of a new Bretton Woods. In an article, an interview and a speech, Giulio Tremonti set out his intentions, which can be summarised as follows:
1. Transforming G8 into G14. This group is currently made up of the large “western” countries plus Russia. To this would be added China, India, South Africa, Brazil and Mexico, as well as another country to be designated.
2. Negotiating a new Bretton Woods within this enlarged framework, by defining a catalogue of rules that would above all ban purely speculative financial instruments, recognised tax havens, balance sheets lacking in transparency, and purely virtual title deeds that are about as real as a videogame.
3. Foreseeing specific international rules for food and water, which are not commodities like the others and cannot be governed by the rule of profit alone.
Mr Tremonti's argument is clear. The Bretton Woods system (from the name of the small town in the United States where it had been created in 1944) has not worked since 1971, when President Nixon had suspended the convertibility of the dollar into gold, but it was not replaced by new rules and the dollar had continued in practice to be considered a “reference currency”. The end of the dollar's stability and the rise of the euro have changed the situation, and the lack of rules has caused the crisis we know today. New rules are needed, this time with the participation of the large emerging countries also.
Powerlessness of the EU as such. The EU is not able to act as such, as it is not formally a part of the international monetary and economic organisations (nor the G8, the IMF, or the World Bank), essentially because of the fact that the main member states have not given up their individual participation (even though Mr Juncker and Mr Trichet often take part in meetings and Mr Barroso does so more and more). Mr Juncker has often denounced this situation but that's the way it is. It remains to be seen whether the member states will all, within the future G14, give their support to the proposed new international rules.
Reintroducing ethics into finance. Both Mr Sarkozy and Mr Tremonti have placed emphasis on the political, social and ethical significance of their projects, over and beyond the technical aspects. Nicolas Sarkozy has in principle defended the free economy (“anti-capitalism does not provide a solution”) but denounced “a system that betrays the spirit of capitalism. A certain idea of globalisation comes to an end with the end of financial capitalism that had imposed its logic to the whole economy and had contributed to its perversion (…). The whole world financial and monetary system must be re-examined from every angle”. Giulio Tremonti added the invitation to relaunch public investment in major infrastructure, and made a virulent attack against the “economists, who have not understood what has happened and who tackle effects rather than causes”, and whose only correct predictions have been “retroactive, made after the event”. He had gone on to say: “Today, I say: economists, be silent!”. Priority must be given to manufacturing, to the production of goods, and banks must return to their real function: that of financing economic activity.
(F.R./transl.jl)