October 16, 2008
What a difference a weekend makes! Doom and gloom replaced by broad grins at yesterdays EU summit. One week ago, the financial markets were close to implosion. Enter EU Euro heads of government/state on white horses led by the unlikely figure of the UK prime minister and a brilliantly successful Sunday at l’Eysée. Remarkably, its Europe that has taken the lead to avert the financial meltdown. As Tuesday’s Financial Times said, “Washington forced to follow European bandwagon”; “Undertakers deliver last rites for US capitalism.”
At last the markets have been stabilised on the financial front. However, they are falling again due to deep concern about economic recession. Speculators have got the message that they are betting against determined governments. However, it must be remembered that only the financial meltdown has been averted. Let’s hope that the same cooperation will be applied to the economic recession. Confidence must be restored, at least to the extent of a commitment by the governments to take all necessary steps – otherwise recession becomes a self-fulfilling prophesy.
Does our hero rest on his laurels? Gordon Brown really has the bit between his teeth and is in his element. Stage 2: he rightly said that, “We now have global financial markets, but what we do not have is anything other than national and regional regulation and supervision,” The Bretton Woods institutions must be revisited. The IMF needs rebuilding. An early warning system is needed for the world economy. All the institutions must introduce much greater transparency. EU leaders were united yesterday in calling for a Bretton Woods II summit to redesign the world’s financial architecture. Brown argued that the meeting could also be used to progress the Doha Trade Round. This would certainly be a test of the Sarkozy-Brown ‘partnership’. Do we see emerging another Franco-British ‘odd couple’ to emulate the one that delivered the 1992 programme – Jacques Delors and Arthur Lord Cockfield?
This is a great opportunity for European leadership: let’s ensure an ongoing decisiveness and that we speak with a single voice. Leadership means in partnership with the US and others, but Washington is likely to be far less doctrinaire and amenable to reform on lines closer to those of the EU, China and other countries. But the role of government will still be a contentious issue and the huge difference in political systems will have to be taken into account, in the light of the key role which Congress plays.
It will also be interesting to see how this plays out longer term on the UK-EU relationship and Ireland’s ratification of the Lisbon Treaty.Author : Stanley Crossick