UK’s Brown calls for new ‘Bretton Woods’

British Prime Minister Gordon Brown today (15 October) called on world leaders to sign up to his new plan for a major overhaul of the global financial order, introducing a worldwide mechanism to supervise international financial institutions and bringing an end to shadow banking and dubious practices by major companies.

The call comes just a week after he unveiled a plan to rescue the British financial system, which was almost immediately taken up on an EU-wide scale (EURACTIV 13/10/08). Brown said he was now sending another “message to the world”. Terming his initiative a “new Bretton Woods”, he deliberately alluded to the July 1944 efforts of Allied nations to rebuild the economic system in the wake of the Second World War. 

Brown announced his initiative to the press in Brussels just hours before meeting his counterparts at the two-day EU summit, at which the financial crisis and climate change feature on top of the agenda. He said he would circulate a “very detailed” paper about the major reforms urgently needed to his colleagues later today, so that confidence would be restored in the world financial system. 

The UK prime minister explained that he was proposing a system in which financial institutions could no longer conceal transactions and ‘shadow banking’ would become a thing of the past. 

He also spoke out in favour of establishing a global “college of supervisors”. “I am asking that, by the end of this year, 30 of the top world companies be supervised by a college of supervisors that is set up across frontiers,” said Brown, adding: “We now have a global market, global competition and global financial roles. And instead of simply having national financial supervisors, we need to have a global way of supervising the financial system.” Such a college could then serve as an “early warning system for the world economy, so we can see earlier the problems that are hitting other financial markets over other parts of the economies in different continents,” he explained. 

He then pleaded for “profound” reform of the world’s sixty-year old international financial institutions, citing the International Monetary Fund and the World Bank, so that they “meet the challenges of the future”. 

“We need to have a global way of supervising the financial system. We need an early warning system for the world economy, so we can see earlier the problems that are hitting other financial markets over other parts of the economy in different continents. We need to deal with crises as they arise in a better and more coordinated way,” he declared. 

No future in protectionism 

Brown added that he wanted to see a timetable for these proposals “within the next weeks and months,” saying he had already informed European Commission President José Manuel Barroso, US President George W. Bush and Brazilian President Lula da Silva. 

“There is no future in protectionism in dealing with these economic difficulties,” said Brown, adding that if the world came together around his proposal then it would give out an important signal that protectionism was “completely unacceptable”. In turn, he said, this could also open up fresh opportunities for a global trade deal, over which talks in the World Trade Organisation were suspended in July after years of deadlock. 

“I want all countries, and I believe we must go beyond the European Union […], to sign up to urgent action to stabilise our economies. I want all major countries to sign up to the Bretton Woods reforms I am talking about […] and I want all countries to sign the trade deal, which would send a message to the world that protectionism is not the way forward,” said the British prime minister. 

Read more with Euractiv

EU leaders set for scramble on financial supervision

The financial crisis calls for "unprecedented EU action," said Commission President José Manuel Barroso ahead of the European Council that starts today (15 October), urging leaders to adopt a more "integrated" approach to supervising financial institutions. But despite recent moves to better coordinate their bank rescue activities, member states remain broadly divided on the issue of oversight.