Crisis shows limits of monetary system: French minister
The global economic crisis exposed the limits of the international monetary system, particularly the failure to stem massive flows of capital, French Finance Minister Christine Lagarde said Saturday.
The international monetary system "has shown some of its inadequacies in times of crisis", Lagarde said in English during a seminar in which she discussed French goals upon taking the G20 presidency in November next year.
"Its legitimacy (...) rests on arrangements that go back to 1971 and that has not really been questioned," said Lagarde, referring to the post Bretton Woods era.
Lagarde said measures taken by the G20 and International Monetary Fund were "significant but not yet substantial and structural", and France aimed to initiate a debate that would lead to "proposals to make sure that that system serves growth and global coordination more effectively".
"The world has witnessed major shifts, new economies have emerged on the global stage and we have also experienced intense financial globalisation as well as economical globalisation," Lagarde said.
"Even before the crisis started, vulnerabilities were on the rise, as the IMS has failed to prevent global imbalances," she said.
"During the crisis (...) there were large capital outflows mainly from emerging countries (which) have been a major factor in spreading the crisis across borders, and given their magnitude and their volatility they continue to be a real threat to global stability," she said.
"The volatility created by the flows clearly limits, hampers their (emerging economies') ability to develop, and it creates a need for self insurance through reserve accumulation, which contributes to worsening the global imbalances," Lagarde said.
© 2010 AFP