Sarkozy Calls for Revamping of Capitalist System
Friday, October 17, 2008
BRUSSELS, Oct. 16 -- European leaders on Thursday urged that a pending international summit carry out an urgent overhaul of the world's financial architecture and impose new controls on freewheeling bankers and traders. U.S. officials pledged that all good ideas would get an airing but hinted of opposition to giving new authority to international regulators.
French President Nicolas Sarkozy, who holds the European Union's rotating presidency, said here that he will meet President Bush on Saturday in Washington to lay the groundwork for the conference, which the Group of Eight industrialized countries is convening. It should "re-found the capitalist system" that has governed international financial exchanges since World War II, Sarkozy said.
E.U. leaders, who on Thursday completed a two-day meeting in Brussels, have called for globally coordinated regulation of the financial industry, elimination of tax havens and a compensation system in which traders are not rewarded for dangerous risk-taking.
The current international financial system grew out of a U.S.-dominated meeting of 44 allied nations in 1944 at a genteel resort in Bretton Woods, N.H., as victory in World War II was coming into sight. In addition to establishing the World Bank and International Monetary Fund, the conference laid down a philosophy of lowering trade barriers and easing the movement of money across borders.
Launching a remake of this old model -- particularly in such a short time, with so many new participants -- would represent a daunting challenge at any time, but particularly during the twilight of the Bush presidency and the crisis that is still jolting banks and stock markets around the world.
Japan's Nikkei stock index fell by more than 11 percent Thursday, and European markets sank across the board on fears that the financial crisis was leading to a sharp economic slowdown despite efforts by government leaders to shore up the system with massive injections of funds. London's FTSE 100 was down 2.9 percent, Frankfurt's DAX dropped by 2.3 percent, and the CAC 40 in Paris was off by 3.6 percent.
Sarkozy said Thursday that continued nervousness in the markets showed all the more clearly that speed and audacity by the world's leaders are precisely what is required. "We do not have the right to let the luck and the opportunity to create the financial system of the 21st century get away from us," he told reporters after the conference.
The bloc's decision to advocate new financial rules and dispatch Sarkozy to carry the torch to Washington was seen here as an affirmation of European confidence and aspiration to leadership at a moment of reduced U.S. influence in world affairs. "Europe wants the summit before the end of the year," he declared. "Europe wants it. Europe demands it. Europe will get it."
White House deputy spokesman Tony Fratto said Thursday that "every good idea" would be considered at the still unscheduled meeting, which was called by the G-8 countries -- the United States, Canada, Britain, France, Germany, Italy, Russia and Japan. G-8 leaders have urged that leaders from nonmember countries be included as well.
Earlier, Fratto said that anything the gathering did must not restrict the flow of trade and investment. President Bush appeared to echo that concern Thursday when he said at a bill-signing ceremony that "in the long run, one of the best ways to restore confidence in the global economy is by keeping markets open to trade and investment."
José Manuel Barroso, head of the European Union's executive body here in Brussels, cautioned that the United States must be brought aboard for the conference to succeed: "There can't be a solution to the international financial crisis without the active participation of the United States."
Where the summit will take place is also unsettled. Sarkozy has proposed New York. Prime Minister Taro Aso of Japan, which chairs the G-8 this year, wants it to be in his country. He told parliament Thursday that he would prefer that no summit were necessary: "Holding such a meeting would mean we are just one step away from a worst-case scenario," Aso said.