The World Monetary and Economic Conference took place in London 76 years ago, in June 1933, with 66 countries meeting to put an end to the unfolding monetary disorder and trade wars while trying to draw from the lessons of the Great Depression. When it was over, the negotiators admitted failure.
On April 2 this year, world leaders will head to London again to find a solution to a financial and economic crisis as dire as that of 1929. We cannot let history repeat itself. If collective inaction prevails, we risk a return to the political and economic woes of the 1930s, which paved the way to a devastating world conflict.
Of course, we must respond to both the weakening economy and financial instability in a virtual state of emergency. This is why stimulus packages and financial rescue plans were for the first time adopted concomitantly in Europe, the US and some large Asian countries.
At the G20 finance ministers meeting on March 14, all of our countries did their best and made massive efforts to repair their economic machinery as fast as possible.
The policies chosen are different, but all states favor solutions that seem most appropriate to them. All are daring and realistic regarding the tasks that await us.
Like its partners, France has launched significant stimulus measures, with a plan announced by French President Nicolas Sarkozy last December, as well as public investments and early repayment of government debt. If we also take into account the strengthening of social services and legal policies launched last month, France’s stimulus for this year totals more than 2 percent of its GDP, with committed future outflows equaling those of the US.
Moreover, the impact of automatic stabilizers — which enable the government to mobilize more or less fiscal resources, depending on economic conditions — is more powerful in Western Europe than in most of the Anglo-Saxon countries. Yet the US’ macroeconomic situation seems worse than Europe’s in terms of consumption, banking or employment and housing markets.
But, as both Sarkozy and US President Barack Obama have insisted, we must go further. Economic stimulus will work efficiently only if confidence is restored. And confidence can be restored only if the financial system is fully overhauled.
We obviously need to strike at the root of the problem, which requires us to redefine the basic principles of the system. It would be counterproductive to focus on treating the symptoms, only to realize later that the unprecedented budgets for structural policies are neither economically efficient nor politically acceptable.
At the Washington Summit last November, the EU suggested a basic principle: All markets, all territories and all actors putting the global financial system at risk should be monitored.
This principle, to which all agreed, must be enforced even if it upsets old habits and comfortable incomes. I am especially convinced that we must closely monitor actors in financial markets such as hedge funds. Although hedge funds sometimes account for 50 percent of market transactions, they are not registered or subject to rules on transparency. This is not sustainable.
Fighting for transparency also implies confronting states that refuse to collaborate on financial issues at a global level or to combat money laundering or prevent financial risks. We cannot build a safer system if we do not raise global requirements and if we tolerate non-compliance with the rules. Together with Germany, France intends to draw up a list of uncooperative countries and to design a toolkit of appropriate sanctions.