german-foreign-policy.com
From Dollars to Euros (II)
2008/11/10
BERLIN/WASHINGTON
(Own report) - Reaffirming their desire for a position of global leadership, Berlin and Brussels have put forward their first demands to the incoming US administration. After last week's informal EU summit, European leaders stated that the EU would like to be a trail-blazer in overcoming the world's financial crisis. Concrete proposals have been elaborated for next weekend's World Financial Summit, which could provoke a power struggle with the United States, because they are diametrically opposed to US priorities and are seeking to weaken the US position in the global financial system. The days of the dollar's uncontested predominance are over, and it is about time that the Euro's growing importance is reflected in the rules of the world's financial exchanges, French President Sarkozy declared in the name of the EU. German government advisors see a certain risk: if the EU surges ahead, it would likely end in failure. The German government is attempting to camouflage its German-European offensive for gaining influence as a transatlantic alliance "renewal" proposal, supplemented with proclamations of sympathy for President-elect Barack Obama.
"And quickly"
Berlin and the EU have put forward several proposals for the reorganization of the global financial system, to reaffirm their desire for a position of global leadership. These proposals were formulated at an informal summit of the 27 EU state and government leaders last Friday. They are in line with German concepts and should be supported by all EU-states participating in the World Financial Summit to be held on November 15 in Washington. Germany, France, Great Britain and Italy will be represented. As was announced, Spain and the Netherlands could also be included,. The proposals should become concrete steps. A catalogue of measures should be elaborated within one hundred days, demands German Chancellor Angela Merkel, because we "cannot wait years."[1] "We demand to be heard, and quickly," confirms French President Nicolas Sarkozy: "I am not going to be participating in a summit of polite conversation." After all, "we know where it started."[2]
"Pushy and Rash"
The EU's insisting tone is being attentively registered in the United States, particularly since the EU's proposals are diametrically in contradiction with Washington's interests. Berlin and Brussels are demanding that "No financial institution, no market segment and no jurisdiction must escape proportionate and adequate regulation or at least oversight,"[3] Over the past few years, the USA - not least because of cooperation with numerous EU countries including Germany - increased its fortune, thanks to the deregulation of financial markets and is refusing to comply with extensive international rules and regulations.[4] Serious conflicts can be expected. As French President Sarkozy suggests, some US officials, who play down the need for drastic reforms, are making "a tragic mistake".[5] On the other hand, the US press reports that Sarkozy's approach is considered as being "pushy and rash".
Interlocking
The upgrading of the International Monetary Fund (IMF) to become a kind of global financial services authority could also provoke controversy. This upgrading is being demanded by Brussels, but not supported by Washington. We are "convinced" that there will be "little support" for "empowering an international institution to regulate the entire world's financial markets", one can hear in the US capital.[6] Berlin is proposing a compromise, the "interlocking" between the IMF and the Financial Stability Forum (FSF). The FSF was established on a German-American initiative after the crisis in Asia. After preliminary work by the president of the Bundesbank, Hans Tietmeyer, the G7 established the FSF to monitor the financial markets and warn of impending crises. It is supported by the major Western industrialized nations. Until now, the FSF has not submitted objectionable proposals. And last February, the FSF declared that the global financial crisis does not necessitate the adoption of new global regulations.[7] The "interlocking" between FSF and IMF would further strengthen the West's position in the global financial system in relations to the rest of the world.
Numerous Centers
The current German-European initiative is also aimed at the dominant position of the US dollar in the global financial system. French President Sarkozy would like to replace the system centered around the dollar. "Times have changed," he explained, "now the Euro and other currencies have a place in world financial exchanges, a new reality that he said should be reflected in the rules."[8] Already before Sarkozy, other heads of states and governments of major non western nations had expressed similar views. "The new financial system should have common sources, based on numerous financial centers and leading currencies," and the dependency on the US dollar has to be reduced, demanded Russian President Medvedev last week. Chinese Prime Minster Wen signaled his support to Medvedev.[9]
Considerable Risks
But advisors to Berlin's government are still skeptical and see the risk that the German-European offensive to win influence is not unlikely to end in failure. The November 15 World Financial Summit carries "considerable" risks [10] according to a recent analysis published by the German Institute for International and Security Affairs (SWP). "Because of the diverging interests and the hasty preparations, substantial agreements can hardly be expected." There is a "considerable risk", that the current World Financial Summit will be "akin to the London Monetary and Economic Conference of 1933, one of the greatest failures of economic diplomacy." The parallels are "striking". Agreements on new regulations of the financial market must also be implemented. It is not clear though "how to address the potential undermining of the new regime." In the past, financial markets tended "to return to their normal mode of operation, which is characterized by their greed for short term profit maximization." Over the past few years, both the USA and the EU have weakened the regulations, until they were faced with a crisis and, according to SWP, it will not be different this time."
Sympathies
In the meantime, Berlin is trying to camouflage this German-European offensive for gaining influence as a transatlantic alliance "renewal" proposal. As Foreign Minister Frank-Walter Steinmeier declared, "I think it is long overdue that we renew the relationship between Europe and the United States."[11] Berlin's effort to enhance the German position is disguised as a proposition for the renewal of the alliance and supplemented with numerous public proclamations of sympathy for President-elect Barack Obama suggesting German loyalty, in case Washington grants Berlin greater influence. Berlin is demonstrating its attitude toward presidents, who do not comply, by the way it sees Bush: "Bush has 'flunked'" remarked a German government advisor.[12] It is not known whether he made similar remarks about the former SPD/Green coalition government that was tolerating CIA kidnappings and furnished important support in the war against Iraq.[13]
 
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