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We're still confronted with the risk of a systemic crisis,
Speech by Nicolas Sarkozy, President of the French Republic
The world was right on the brink of the abyss, without this dawning on anyone. In this emergency situation we took, in Asia and Europe, the decisions to overcome the crisis. But let’s look at the situation we’ve got now: we’ve changed nothing structurally. We’re still confronted with the risk of a systemic crisis caused by the default first of a country, then a region and the world. What’s happening? We’re in a new world, we need new ideas. And Europe and Asia, which account for 60% of world GDP, can provide solutions. I was very interested in what the Chinese Prime Minister and our Korean friends said. I’d like us to take initiatives on three absolutely crucial issues for both Asia and Europe.
New Monetary Order
Firstly: we live in a world where monetary imbalances are putting all our economies at risk. Let me take two examples: do you know that since 1990 the world has experienced 42 currency crises? 42 times, whole countries in Asia and Europe have been literally drained of their capital. Secondly: 1974 saw the creation of the G7 – which became the G8 – to talk in particular about monetary problems. Today the G7 forum is no longer the legitimate one in which to talk about them. Why? Because, for example, China isn’t a member of the G7. So today, in 2010, we haven’t got a single place where, in the world, we can talk about monetary questions. Every country does what it wants, tries to safeguard its sovereignty, but we are living in the 21st century without a monetary order. We’re living on the basis of the Bretton Woods fiction that there is only one economy and one currency. We clearly need to define a new monetary order. Where do we discuss currency issues? Aren’t currencies a matter of concern to heads of State and government? Does every world region have to accumulate reserves in order to avert a crisis? These are issues we have to address and resolve.
Commodity Price Regulation
Second absolutely essential issue: the terrifying volatility of commodity prices. In one year, oil has risen from USD 40 to USD 140, but the world has stayed the same. There have only to be catastrophic fires in our Russian friends’ country and the cereal price rises 65% in two months. Who can accept that? We have made efforts to regulate derivatives in the financial arena; is the existence of commodity derivatives acceptable without us deciding anything? I’m in favour of the market, but there must be no lies: the market doesn’t set commodity prices today, it’s the speculators. We must regulate.
Nnew Global Economic Governance
Third, absolutely huge issue: what global governance have we got in the economic sphere? We have successfully reformed the World Bank; the IMF reform is clearly at last on the agenda. What role for the IMF? What representation in the IMF? What role in the IMF for regions like Africa?
These I think are the three major issues, President Van Rompuy: a new monetary order, regulation of commodity prices – regulation doesn’t mean control – and new economic governance. Where are the decisions taken? Who takes them? According to what democratic process? These seem to me the three major issues and, in agreement with our Korean friends, I’d like to make them the essential issues for the next G20.
A final point to conclude, because I’ve already exceeded my allotted speaking time. I believe we must radically change the way we prepare international summits. The summit must be the conclusion of a far longer process during which our ministers and our experts have talked to each other and made proposals, so that there are fewer summits where speech after speech is made without those delivering them ever meeting and where decisions are taken even before they have met. In this case we can content ourselves with a telephone conference or exchange of communiqués, which will avoid us increasing our carbon footprint…
I think that we’re going to have to think about this too.
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