Sarkozy: ‘It was necessary to rebuild a regulated capitalism in which whole sections of financial activity were not left to the judgement of market operators’
Presidents from all over the world have spoken out about the turmoil in the financial markets, saying regulation was needed and bankers should be punished.
The 63rd session of the United Nations General Assembly held last month also heard Argentina’s president, Christina Fernández De Kirchner, point out that this time a developing nation was not responsible for the crisis.
This used to be called the ‘rice effect’, she said. Now the cause of the crisis is right at the centre of the financial world and, if anything, should be called the “jazz effect”, she added.
French president Nicholas Sarkozy spoke on behalf of the European Union and called on world leaders to examine the lessons supposedly learned from past financial crises.
“It was necessary to rebuild together a regulated capitalism in which whole sections of financial activity were not left to the judgement of market operators, and in which banks did their job,
which is to finance economic development rather than engage in speculation. In our globalised world, the fate of each is linked to that of all,” he said.
Sakozy added that central to a new model should be the inclusion of measures to ensure those who jeopardise people’s savings are punished.
UN secretary-general Ban Ki-moon explained that the global financial crisis endangered all work by the United Nations – particularly in the areas of financing for development and the Millennium Development Goals.
“If there is a call for leadership, it is now,” he said, urging all members to come together to restore order to global financial markets.
Brazil president Luiz Inácio Lula Da Silva opened his speech by stating the crisis “required decisive action by governments, especially in countries at the heart of the crisis. “The economy is too serious an undertaking to be left in the hands of speculators. Mechanisms for prevention and control were needed to provide total transparency to international finance,” he added.
Gloria Macapagal-Arroyo, president of the Philippines, said: “Economic uncertainty moves like a terrible tsunami around the globe, wiping away gains. The light at the end of the tunnel has become an oncoming train, with new shocks to the global financial system.” She noted it would take time and perseverance to put the pieces back together.
The presidents’ speeches were hard-hitting and called for action to be taken in light of the events that have transpired.
In a statement, Angel Gurria, OECD secretary-general, welcomed the adoption of the US government’s systematic rescue plan. By putting an end to the de-leveraging of financial institutions the plan is contributing to the stablisation of the US and world economies, he said.
Gurria vowed that the OECD will continue to propose and support regulatory and supervisory reforms of financial and capital markets that address the main market failures emerging during the crisis.
Before the start of the UN General Assembly, the G7 finance ministers had issued a statement regarding the G7’s efforts in relation to the financial crisis.
“We reaffirm our strong and shared commitment to protect the integrity of the international financial system and facilitate liquid, smooth functioning markets, which are essential for supporting the health of the world economy,” the statement said. The ministers vowed they would maintain heightened close cooperation between finance ministries, central banks and regulators.
John Lipsky, the first deputy-MD of the International Monetary Fund (IMF), was mildly optimistic in his address about the crisis, possibly in an effort to bring some sense of calm to the antsy financial markets. He acknowledged the gravity of the situation, but ultimately believed in the underlying resilience of the global economy.
Lipsky said: “This storm can be weathered without a damaging global recession, but attaining such an outcome will require clear and coherent policy responses from public authorities and institutions around the world, together with the restoration of private market functionality and an end to investors’ spiralling crisis of confidence.”
Decoupling is a thing of the past as the US slowdown has leaked into the rest of the world. Lipsky said this was evidenced by the declines in activity in both the Euro area and Japan.
However, according to Lipsky, several factors provide some reassurance that a severe downturn can be avoided. The sharp decrease in the oil price, the possibility of the US housing market bottoming-out in 2009 and the robust emerging market growth were all cited as indicators that the worst can be avoided.
© 2008 funds europe