WASHINGTON, Sept. 28 -- World Bank President Robert B. Zoellick said on Monday that the global economic crisis is contributing to shifts in power relations in the world that will impact currency markets, monetary policy, trade relations and the role of developing countries.
In a speech ahead of the Annual Meetings in Istanbul, Turkey, of the World Bank and International Monetary Fund (IMF), Zoellick said leaders should reshape the multilateral system and forge a "responsible globalization" that would encourage balanced global growth and financial stability, embrace global efforts to counter climate change, and advance opportunity for the poorest.
World Bank President Robert B. Zoellick said on Monday that the global economic crisis is contributing to shifts in power relations in the world that will impact currency markets, monetary policy, trade relations and the role of developing countries.
File photo shows that Robert Zoellick, president of The World Bank, speaks at the International Economic Forum of the Americas conference in Montreal, June 8, 2009. (Xinhua/Reuters Photo)
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"The old international economic order was struggling to keep up with change before the crisis," Zoellick told an audience at the Paul H. Nitze School of Advanced International Studies of the Johns Hopkins University, in Washington, D.C.
"Today's upheaval has revealed the stark gaps and compelling needs. It is time we caught up and moved ahead," he said.
In the speech entitled "After the Crisis?" Zoellick said "Peer review of a new Framework for Strong, Sustainable and Balanced Growth agreed at last week's G20 Summit is a good start, but it will require a new level of international cooperation and coordination, including a new willingness to take the findings of global monitoring seriously. Peer review will need to be peer pressure."
It was also important for the G20 to remember those countries not at the table.
"As agreed in Pittsburgh last week, the G20 should become the premier forum for international economic cooperation among the advanced industrialized countries and rising powers," said the World Bank chief. "But it cannot be a stand-alone committee. Nor can it ignore the voices of the over 160 countries left outside."
China's strong response during the economic crisis and rapid recovery had underscored its growing influence as a stabilizing force in today's global economy, he said.
But its leaders face challenges caused by rapid credit growth and the economy's dependence on exports, he added.
The United States had clearly been hit hard by the crisis. Its prospects depend on whether it will address large deficits, recover without inflation, and overhaul its financial system, according to Zoellick .
The United States has a history of recovering from setbacks. "But the United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency," Zoellick said, "Looking forward, there will increasingly be other options to the dollar."
The crisis has brought to the attention of lawmakers the significant role played by central banks.
Central banks performed well once the crisis hit but their role in the build-up was less convincing.
"In the United States, it will be difficult to vest the independent and powerful technocrats at the Federal Reserve with more authority," said Zoellick.
"My reading of recent crisis management is that the Treasury Department needed greater authority to pull together a bevy of different regulators," said the former U.S. Deputy Secretary of State.
"Moreover, the Treasury is an executive department, and therefore Congress and the public can more directly oversee how it uses any added authority," said Zoellick.
Developing countries had already been on the rise before the crisis and their position has been further strengthened because of it. Their growing share of the world economy was a positive development.
"Looking beyond, a more balanced and inclusive growth model for the world would benefit from multiple poles of growth," Zoellick said. "With investments in infrastructure, people, and private businesses, countries in Latin America, Asia, and the broader Middle East could contribute to a 'New Normal' for the world economy."
Thursday, October 1, 2009
Backgrounder: Developments of global financial crisis
ISTANBUL, Sept. 30 -- The International Monetary Fund (IMF) and World Bank annual meetings slated for Oct. 6-7 in the Turkish city of Istanbul will discuss key economic and financial issues on recovery from the worst global recession since the 1930s.
The global financial crisis and the ripples it sent across the world economy have devastated banking systems, erased jobs and stagnated global trade since its beginning last year.
Following are major facts about the crisis and its developments:
The crisis has its roots in the imbalance of the global economic structure, years of freewheeling lending in the United States and loose regulation on financial markets.
The crisis was triggered by a subprime mortgage meltdown that erupted in the United States in the summer of 2007, which forced closure of many companies that largely invested in products related to subprime mortgages and tightened credit around the world.
As the subprime mortgage losses spread, Lehman Brothers' bankruptcy and Merrill Lynch's buyout in September 2008 marked the outbreak of the global financial crisis. Credit malfunction deepened while stocks and commodities plunged.
The U.S. government pledged in October to invest 700 billion U.S. dollars in bailout to cash-stripped financial institutions.
The crisis soon sent shock waves to other parts of the world. As one of the hardest-hit countries, Iceland saw its banking industry collapse within two weeks in October 2008, accompanied by a dive in stock prices and depreciation of the country's currency and had to seek 6 billion dollars of aid from the IMF.
As the crisis caused downturns in European and U.S. economies, exports to those countries tumbled and developing countries were affected. The IMF provided at least 52 billion dollars to Hungary, Serbia, Latvia and Ukraine, which saw severe capital flight and a sharp drop in exports.
The United States, Japan and the European Union (EU) all slipped into economic recessions as demand sagged.
Central banks around the world cut interest rates while governments rolled out stimulus plans to support the economy.
In a swift and strong response to the crisis, the Chinese government announced a 585-billion-dollar stimulus package in November 2008 to be rolled out over the next two years aiming at expanding domestic demand and promoting economic growth.
In February 2009, U.S. President Barack Obama signed a 787-billion-dollar stimulus package in hopes of invigorating the U.S. economy through government investment and tax cuts.
The United States saw a large scale of government intervention into private firms amid the crisis. In March 2009, the U.S. government further announced a "toxic asset plan" that would form public-private partnerships to help cleanse banks of up to 1 trillion dollars in toxic assets.
Between April and June 2009, auto producers Chrysler and General Motors were forced by the government to file for bankruptcy protection.
Stronger role of international financial organizations and better supervision on financial sectors were demanded. The Group of 20 leaders agreed in April to provide up to 1.1 trillion dollars for the IMF and the World Bank as well as to tighten monitoring of financial activities.
To rebuild confidence in their financial systems, the U.S. government in July announced a comprehensive reform plan on financial monitoring and the EU leaders also passed a reform plan aimed at establishing a pan-Europe financial monitoring system.
The financial crisis prompted a cry for transparency of fund flows. Tax havens including Switzerland, Andorra, Liechtenstein and Belgium agreed in March to loosen their confidentiality rules to cooperate with other nations on cracking down on cross-border tax evasion.
High bonuses paid to executives in financial institutions also came under fire amid the crisis in the United States.
President Obama ordered the Treasury Department to prevent the 165 million dollars of executive bonuses from being paid in the insurance giant American International Group in March, while the executives returned part of their bonuses under the pressure of public reprimand.
The global financial crisis and the ripples it sent across the world economy have devastated banking systems, erased jobs and stagnated global trade since its beginning last year.
Following are major facts about the crisis and its developments:
The crisis has its roots in the imbalance of the global economic structure, years of freewheeling lending in the United States and loose regulation on financial markets.
The crisis was triggered by a subprime mortgage meltdown that erupted in the United States in the summer of 2007, which forced closure of many companies that largely invested in products related to subprime mortgages and tightened credit around the world.
As the subprime mortgage losses spread, Lehman Brothers' bankruptcy and Merrill Lynch's buyout in September 2008 marked the outbreak of the global financial crisis. Credit malfunction deepened while stocks and commodities plunged.
The U.S. government pledged in October to invest 700 billion U.S. dollars in bailout to cash-stripped financial institutions.
The crisis soon sent shock waves to other parts of the world. As one of the hardest-hit countries, Iceland saw its banking industry collapse within two weeks in October 2008, accompanied by a dive in stock prices and depreciation of the country's currency and had to seek 6 billion dollars of aid from the IMF.
As the crisis caused downturns in European and U.S. economies, exports to those countries tumbled and developing countries were affected. The IMF provided at least 52 billion dollars to Hungary, Serbia, Latvia and Ukraine, which saw severe capital flight and a sharp drop in exports.
The United States, Japan and the European Union (EU) all slipped into economic recessions as demand sagged.
Central banks around the world cut interest rates while governments rolled out stimulus plans to support the economy.
In a swift and strong response to the crisis, the Chinese government announced a 585-billion-dollar stimulus package in November 2008 to be rolled out over the next two years aiming at expanding domestic demand and promoting economic growth.
In February 2009, U.S. President Barack Obama signed a 787-billion-dollar stimulus package in hopes of invigorating the U.S. economy through government investment and tax cuts.
The United States saw a large scale of government intervention into private firms amid the crisis. In March 2009, the U.S. government further announced a "toxic asset plan" that would form public-private partnerships to help cleanse banks of up to 1 trillion dollars in toxic assets.
Between April and June 2009, auto producers Chrysler and General Motors were forced by the government to file for bankruptcy protection.
Stronger role of international financial organizations and better supervision on financial sectors were demanded. The Group of 20 leaders agreed in April to provide up to 1.1 trillion dollars for the IMF and the World Bank as well as to tighten monitoring of financial activities.
To rebuild confidence in their financial systems, the U.S. government in July announced a comprehensive reform plan on financial monitoring and the EU leaders also passed a reform plan aimed at establishing a pan-Europe financial monitoring system.
The financial crisis prompted a cry for transparency of fund flows. Tax havens including Switzerland, Andorra, Liechtenstein and Belgium agreed in March to loosen their confidentiality rules to cooperate with other nations on cracking down on cross-border tax evasion.
High bonuses paid to executives in financial institutions also came under fire amid the crisis in the United States.
President Obama ordered the Treasury Department to prevent the 165 million dollars of executive bonuses from being paid in the insurance giant American International Group in March, while the executives returned part of their bonuses under the pressure of public reprimand.
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