Global Economics
January 31, 2009
Pointing out that cooperation among international financial institutions has failed to protect the world against the worst financial crisis in decades, German Chancellor Angela Merkel called for the forging of a new charter.
"This may even lead to a UN Economic Council, just as the Security Council was created after World War II," she told the World Economic Forum's annual meeting in Switzerland.
She also called on governments to take responsibility for their economies and flex greater control of the markets.
"The state is the guardian of the economic and social order so it has a very clear role. Competition is necessary but it is something that also needs a certain discipline and principles," she said.
"Freedom is a necessary precondition for market forces to operate. But individual freedom needs to be limited if it takes freedom away from others."
Merkel criticizes US subsidies
Saying that the word needs "clear-cut rules in clear contrast to an unfettered capitalism that runs enormous financial risks," Merkel also used her speech to take aim at the US for subsidizing ailing car companies.
The chancellor said she was "very wary of seeing subsidies in the United States being injected right now into the automobile industry. This must not be allowed to last too long because they inevitably lead to some distortion and are, quite frankly, protectionist."
Safeguarding the environment and reducing the poverty gap were also principles that Merkel says "need to be enshrined in the form of a global economic order charter" that "could lead to the establishment of a UN economic council."
Merkel's proposal is an expansion on British Prime Minister Gordon Brown's call to update the 1944 Bretton Woods structure that established the World Bank and International Monetary Fund, which are now being used to bail out countries during the financial crisis.
The British leader warned earlier in the day against financial protectionism that would lead to "a retreat of globalization and a reduction of trade and cross-border activity," he said.
Brown will host the Group of 20 leaders summit of major developed and emerging nations outside London in April. He indicated his goal would be to agree on worldwide fiscal stimulus.
Merkel also underlined the upcoming G20 leaders meeting as the best forum to tackle the issue and indicated her positive outlook despite the continuing financial meltdown.
"Even this worldwide financial crisis can be mastered. We can master it in such a way that we turn create progress that will enable us to better live together on this planet," she said.