From the Council on Foreign Relations:
|Speaker:||Jean-Claude Trichet, President, European Central Bank|
|Presider:||Robert E. Rubin, Co-chairman, Council on Foreign Relations; Former U.S. Secretary of the Treasury|
April 26, 2010
General Meeting: C. Peter McColough Series on International Economics: Global Governance Today
This meeting was part of the C. Peter McColough Series on International Economics.
Jean-Claude Trichet, president of the European Central Bank, emphasized the need for global coordination of financial regulation in an April 26 address at the Council on Foreign Relations. Trichet argued for unified international accounting and capital standards for banks, as well as more say for industrializing countries in structuring global financial markets. Emerging-market economies have become “a source of strength for the world economy,” he said, and the economic crisis has “led to a clear recognition of their increased economic importance and to their full integration into the institutions of global governance.” Trichet declined to comment about ongoing negotiations over the IMF-EU joint bailout for Greece and said he was “confident that they will be concluded soon and rightly.” In comparing European and U.S. views on financial reform, he said the biggest disparities included the greater influence of investment banks in U.S. policymaking and vastly different accounting practices between European and U.S. companies. “We need accounting rules that will be the same on both sides of the Atlantic,” he said.
The meeting highlights below feature former U.S. Treasury secretary and CFR co-chair Robert Rubin, the moderator of Trichet’s discussion with CFR members.
Highlights of the Conference
I think one of the most important features of the present world is that we had an historical change of global governance, an historical change which had been prepared when you were yourself the head of this very important administration in the United States, with the creation, in the occasion of the Asian crisis, of the G-20, which was not the prime grouping for global governance, but was a very important grouping, obviously, particularly for the working out of standards and codes and rules and regulations. But the prime grouping for global governance was, at the time, the G-7.
So the core, if I may, of the industrialized world in terms of dimension was clearly the heart of global governance, at least in its dimension, which is the informal grouping. And I see there France that — we are the heart of the preparation of this global governance in various G-7 at the level of heads.
All that being said, we have now shifted the battle. The battle is not now in the hands of the industrialized world. The battle is in the hands of a grouping of countries which comprise the industrialized core countries and the emerging economies.
And one of the indivisible events which was in the succession of events in Washington last days was that there was no G-7 communique and there was no G-7 briefing. The communique and the briefings were the G-20.
So again, this is at the level of global governance, something which I trust is of utmost importance. And I would say that we owe this transformation — which, again, has been prepared; it is something which didn’t come as a shock and, I would say, unexpected event, because the G-20 existed already. But this shift from the G-7 to the G-20, we (owe it ?), it seems to me, obviously, because it was overdue that these economies that were obviously systemic at the global level would have a full ownership of this global governance at the level of this informal grouping that I mentioned. And that’s of course something which appears absolutely obvious.
I trust also that there is a second reason. Perhaps the industrialized country proved that they were quite clumsy themselves in running their own economy, which were — and remain, of course, at the core of global finance and of the global economy, and that is something that we have to take fully into account. And it’s — (inaudible) — upon the industrialized country to be themselves fully conscious of the fact that they have their full role to play in the G-20 because they remain fully responsible for a large part of the core of global finance and of the global economy.
Let me say a word on something which has happened also quite invisibly, but in front of eminent central bankers. I cannot help mentioning also that in the cooperation between central banks we had large, very large ownership — which has been prepared by the creation of the global economy meeting in Basel, by the full participation of a large number, a very large number of central banks in our discussions in the preparation, in the, I would say, orientations that we were giving to a number of committees that are not very visible but very important at a global level.
But there also we had shifted the prime grouping for governance at the level of central banks. It is now another G-10 who is the prime grouping for governance of central banks. It is the global economy meeting which again comprehends a large group of central banks of the industrialized world and of the emerging countries. And this is something which, of course, is parallel to what has been done at the level of the ministers, and governors, and at the level of heads, and which is also illustrating to which extent, at the moment of these crises — which, again, in its quantity and quality, if I may, is so dramatic, is coinciding with a very, very important and dramatic change of global governance.