The international community must unite to tackle the economic crisis and reform the world's financial system and the way it is controlled, British Finance Minister Alistair Darling wrote in the Wall Street Journal.
“We need to boost demand through a range of measures: monetary loosening, fiscal stimulus, and restoring bank lending,” Darling said, adding that those steps needed to be implemented quickly and effectively, where they have already been agreed. In an opinion column in the Wall Stree Journal Darling called for a boost to consumer demand, reform of world financial regulation, and any more resources for the International Monetary Fund.
He said a large increase in the IMF's resources was needed to help prevent the spread of the crisis from companies to countries.
“Alongside this, we must reform the IMF and the World Bank so that they become more accountable and better able to intervene earlier before problems become deep-seated,” he wrote.
Darling also called for a reform of financial regulation.
“All types of risk to consumers, markets and economies need to be covered - including by joining up macroeconomic and financial oversight, opening up tax havens, and promoting transparency.”
Risks must be better managed through early warning capabilities and colleges of supervisors, he said.
“As part of this, we need to ensure that in the future banks build up a buffer in the good years, so that when a downturn comes they are strong enough to continue lending to businesses and families.”
Darling said that this meant changing the regulatory requirements on banks' capital, adding that authorities also needed to be able to stop banks from overstretching themselves by capping banks' leverage ratios.
“Each of these steps, if combined, could mean a whole much greater than the sum of its parts.”
The run-up to the G20 meeting, which is due to begin in southern England later on Friday, has been dominated by lively transatlantic debate about what the summit's priorities should be and the degree to which countries should commit to aggressive stimulus action. (Reuters)