Darling and Brown: World will never be the same
Darling and Brown: World will never be the same
Friday, 10, Oct 2008 04:28
Chancellor Alistair Darling and prime minister Gordon Brown both pointed to fundamental change in the international economic system this morning.
Mr Darling called for fresh ideas to solve the global banking crisis, while Mr Brown has called on every bank in the world to increase its capital ratio.
Writing in the Financial Times, the chancellor of the exchequer – currently in Washington DC to meet with G7 finance ministers and the International Monetary Fund (IMF) – said: "The world economy is changing. Sticking with the solutions of the past is not an option. Now, more than ever, we need new ideas."
He explained the financial crisis and surge in commodity prices had hit every country in the world.
"These twin shocks demonstrate the need for new, comprehensive approaches to maintain stability, both in economies and financial markets," Mr Darling wrote.
"All forecasters, including the IMF, have been surprised by the profound impact of this shock. Beyond that, it is clear that the global financial system will never be the same, so we must discuss how to strengthen the system for the future."
The chancellor wrote in the FT the first challenge was to take action to stop financial collapse and put banks on a firm footing.
"Markets cannot do this alone," he said. "Governments have to take the necessary action."
Meanwhile, Gordon Brown, writing in the Times, called on other governments to follow the lead of the UK's £50 billion recapitalisation offer to banks.
"Every bank in every country must meet capital requirements that ensure confidence," the prime minister wrote.
"Just as in the UK we have made at least £50 billion of new capital available, so other countries where banks have insufficient capital will need to take measures to address this.
"Only strong and solid banks will be able to serve the global economy."
Mr Brown warned: "The potential economic consequences cannot be understated. The role of banks is to circulate the savings from deposits, our pensions and from companies to those that need to spend or invest them.
"This paralysis of lending from loss of confidence jeopardises the flow of money to every family and every business in the country."
The prime minister also called for greater transparency in the financial markets and promised reformed to encourage "responsible risk-taking".
"When risk-taking crosses the line between the responsible entrepreneurship, which we want to celebrate, and irresponsible risk-taking, then we have to take action to see that markets work in the public interest to reflect our shared values," he wrote.
The European stock market opened with plunging falls this morning, in a sign global efforts to stabilise the situation have so-far proved unproductive.