G-8 leaders pledge “close cooperation and coordination,” call for reform

Sources: G8 Leaders Statement on the Global Economy

Emphasizing the need for advanced economies to work closely with emerging economies to avoid nationalistic and protectionist behavior in dealing with the global economic crisis, the G-8 nations (France, Germany, the U.K, Russia, the U.S., Canada, Italy, and Japan, as well as the President of the European Commission) reaffirmed their commitment to cooperation this week.  They declared themselves “united in their commitment” to resolve the crisis--an effort they called a “shared responsibility.” 

The nations also reaffirmed their previous agreement for collective and individual action to address the crisis, namely the commitment to avoid adopting nationalist policies that would jeopardize other nations’ economies.  That policy was sparked by Ireland’s controversial move in early October to guarantee the deposits and debts of the nation’s six largest financial institutions.  Many in the E.U. argued that the move created an uneven playing field, giving the Irish institutions a leg up in the other countries, particularly the U.K., in which they operate.  The G-7 had agreed to the coordinated action plan at their meeting last weekend. 

The press release included a statement expressing the nations’ determination to see a successful conclusion to the currently stalled WTO negotiations.  The statement said that the countries recognize the importance of open economies and regulated markets for growth, both in the developed and developing world.  In view of the need for “regulated” markets, the G8 also expressed their desire to address regulatory reform of the world’s financial sectors, “to address deficiencies exposed by the current crisis.”  Such an effort would build on previous Financial Stability Forum and IMF work and would include both developed and developing countries. 

The nations said they expected to hold a meeting with leaders of  “key countries” in the near future to further the reform effort on a global scale.

Discussion:  Will the hunger for regulatory reform die down once the crisis is under control?  What role might the IMF play in such reform?  Is a reform of the Bretton Woods institutions also in order?