Europe wants new global financial order -by Andrei Fedyashin

The Hindu Wednesday, Oct 22, 2008 Opinion - News Analysis

America is losing Bretton Woods, the global financial system formed at the U.N. Monetary and Financial Conference, commonly known as the Bretton Woods conference. In July 1944, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel, in Bretton Woods, New Hampshire, to regulate the intern
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A Camp David meeting would have been utterly boring and unpleasant for the Americans, if not for Mr. Sarkozy’s compatriot, IMF Managing Director Dominique Strauss-Kahn. Shortly before the Camp David meeting, newspapers reported that Mr. Strauss-Kahn had an affair with Piroska Nagy, an employee of the IMF’s African department.

According to Times Online, the case began in January when Mario Blejer, a senior Argentine-born economist, alleged that Piroska Nagy, his wife, had been seduced by her boss at the Davos international forum.

When their transgression was uncovered, Mr. Strauss-Kahn allegedly helped transfer the Hungarian to a post in London at the European Bank for Reconstruction and Development. The financial official’s romantic fling, which would have gone unnoticed in France, has made breaking news in the U.S. Some say it was done on purpose. British newspapers write that Paris knew about the romantic troubles of Mr. Strauss-Kahn, who was living up to his old name as un grand seducteur. Some politicians say “the case had been leaked to the U.S. media to undermine the French effort” because Mr. Sarkozy has been working with Mr. Strauss-Kahn “to form a new Bretton Woods pact on financial regulation.”

Mr. Sarkozy was reportedly furious because Paris had hoped no news would break until Mr. Strauss-Kahn was cleared later this month. Allies of Mr. Strauss-Kahn and some commentators dismissed the affair as another episode of hysteria by puritanical U.S. institutions. However, even Mr. Strauss-Kahn’s indiscretion cannot seriously influence the current situation. Europe has snatched the initiative of creating a new global financial order from the U.S. and Mr. Bush. The U.S. will be part of the new order but it will not play first violin in the new financial orchestra. And Mr. Bush will leave the White House as a man who attended the burial of the Bretton Woods system.

Challenging task
Those who have undertaken the creation of a new financial system face a challenging task. The trouble is that nobody, not Mr. Sarkozy, nor the EU, China or Japan, knows what it should look like, as proposals and ideas refuse to merge into a clear picture.

Everyone knows that the old system is not good. It is rooted in the greediness of banks and their clients, which cannot be eradicated overnight, and in the mystical belief in a markets’ talent for self-regulation. It is also known that to change this system the world must toughen control over global currency and finances and introduce state regulation of the economy, banks, exchanges, dealers, loans, etc.

Everyone knows that the global currency and financial organism cannot function properly without clearly defined rules, but nobody knows what the new model should be.

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