The Committee on Economic and Monetary Affairs adopted an own-initiative report drafted by Gunnar HÖKMARK (EPP, SE) on Global Economic Governance.
Members recognise the need for policy-makers around the world to continue working on solutions to reform global economic governance to help rebalance the world economy and avoid another slump. They stress that the reform of global governance should ensure that markets are embedded in a comprehensive institutional framework for them to function properly. One of the priority objectives of worldwide economic governance must be the creation of a favourable environment for long-term investment.
Members support the work and commitments of G20 States to implement properly phased growth-friendly fiscal consolidation plans in the medium term while supporting domestic demand at a pace determined by each country’s circumstances, pursuing appropriate monetary policies, enhancing exchange rate flexibility to better reflect underlying economic fundamentals, and undertaking structural reforms to foster job creation and contribute to global rebalancing. They note, however, that, otherwise, prospects at G20 level of correcting global imbalances so far seem limited.
Policy recommendations to address global economic governance: the report:
The report notes that many of the current fora, like the G20, are only for informal discussion, without legal basis or the attributes of international organisations in their decision-making processes or in the implementation and supervision of their decisions, and will as such remain weak as governing structures. It notes that the consensus method of decision-making which characterises many of the global cooperation bodies does not encourage bold decisions to be taken and often leads to vague non-binding agreements. Members urge the global forum to emulate the EU’s move away from exclusive reliance on unanimity.
Reform of the international monetary and financial system and its institutions: Members stress that the European Union must play a leading role in global economic reform to make international institutions more legitimate, transparent and accountable. They believe that the EU should be able to speak with one voice and call for an EU seat in the IMF and the World Bank. They call for a more democratic IMF, including an open and merit-based election of its managing director, and a substantial increase in voting rights for developing and transitional nations.
The report underlines the need for a global understanding and a common approach regarding monetary policy, international trade, sustainable public finances and flexible currencies based on economic fundamentals; considers that the global economy should be characterised by open markets for the mutual benefit of all participants. Members also underline that high social and environmental standards are vital and must be developed in all regards. They stress that the IMF and WTO should be the core of such a process, with input from the G20 and other relevant bodies.
The Commission is called upon to refine the EU trade and investment strategy to include the BRIC countries (Brazil, Russia, India and China) as future major trading partners with their own interest in a common global network of interlocked interests of socially and ecologically sustainable development.
The report also calls for the establishment of an international board of central banks – comprised in the first place of the central banks of the EU, Japan, UK and US – with a mandate to coordinate monetary policy, to oversee financial supervision, and to extend and promote the SDRs as a global reserve currency.
Global financial sector governance: Members call in this regard for the Union’s supervisory authorities to take the lead in building international cooperation and establishing best practices in financial regulation. It also underlines that convergence towards a common financial regulatory framework between the US and the EU would be beneficial.
The report insists on the need for:
The report calls on the Basel Committee on Banking Supervision to propose measures to ring-fence the retail banking activities of systemically important institutions and requires them to be capitalised on a standalone basis. It recommends the development of a suitable international infrastructure under the aegis of the IMF offering authorities and industry alike a unique source for standardised basic financial data as a technical enabler for international prudential tasks and safer and more efficient industry processes alike.
Reconfiguration of the international monetary system: Members stress the positive effects of a stronger economic governance framework in the EU and the euro area for global cooperation and coordination. They note the great importance of strengthening and deepening the European Single Market not only as an internal objective but also as a leading example for other trading blocs around the world.
The Commission is called upon to submit a proposal on how to improve the EU’s internal decision-making procedure to improve its coherence as regards external representation in the area of economic and financial affairs to ensure that the EU’s representation is democratically accountable to the European Parliament, Member States and national parliaments.