THE IMF needs to fix “intrinsic defects” in the world’s monetary system, China said yesterday as officials from around the globe wrestled with how best to ward off future financial crises as police used tear gas and water cannon on protesters outside.
The International Monetary Fund should aim to “provide a stable monetary environment for global growth and financial stability”, Chinese finance minister Xie Xuren told finance chiefs at the IMF and World Bank’s semiannual meeting in Istanbul.
China’s views were just part of a wide-ranging and difficult debate about the future of the global economic system that produced consensus on the need for change but disagreement on specific steps. “The old order is gone. We should not waste our time and tears lamenting it,” said World Bank president Robert Zoellick.
A large and unsustainable run-up in home prices in the United States and some other developed economies, fuelled by cheap credit from export powerhouse China, laid the ground for the worst financial crisis since the 1930s. Now, officials are trying to join hands to “rebalance” the world economy.
US treasury secretary Timothy Geithner called on the IMF to provide rigorous surveillance to spot new asset bubbles and keep country foreign exchange policies in line with the rebalancing goal. “The IMF will need to be a truth-teller,” Mr Geithner said.
Trying to do just that, IMF managing director Dominique Strauss-Kahn told major exporting nations that they may have to shoulder the burden of a global rebalancing.
Bankers, policymakers and economists have called on the IMF to assume a bigger role in managing the global economy and directing reforms to avoid a recurrence of the crisis. The financial crisis forced hard-hit countries to turn to the fund for help, and the IMF has asked member countries to greatly increase its resources so it can play an enhanced lender-of-last-resort role.
But enthusiasm for the IMF still has sharp limitations. German central bank chief Axel Weber said the fund’s growing clout should be kept in check, because nations could take undue risks if they think the IMF will save them.
About 100 people were taken into custody, some for throwing stones and petrol bombs as they tried to break through a police cordon and march towards the conference centre, a few hundred yards north of Taksim square.
Many Turks are suspicious of the IMF, after decades in which repeated bailouts failed to prevent the country lurching between economic crises. But the protesters appeared to be largely union members or students, with estimates of numbers ranging from a few hundred to 6,000. Police have stepped up security across Istanbul for the past week as finance ministers and central bankers held their discussions on the state of the global economy. – (Reuters/The Financial Times Limited 2009)
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