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A financial new world order?

Bush says reforms must improve, not fetter, the free market; Europeans hint at more robust intervention.

By Staff writer of The Christian Science Monitor / October 20, 2008

United? President Bush, French President Nicolas Sarkozy (l.), and European Commission's Jose Barroso.

Jason Reed/Reuters

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WASHINGTON

When President Bush hosts a world financial summit in the coming weeks, one of the least multilateral American presidents in decades will set in motion what could result in a full reordering of the global financial system.

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The series of summits that Mr. Bush announced over the weekend at Camp David with European leaders at his side suggests a broad understanding among them: that the current crisis requires the kind of global regulatory reforms that have eluded major powers in the past.

Europeans especially are speaking of a "Bretton Woods II" that could do for financial markets what the 1944 summit at a resort in New Hampshire did for monetary policy.

But the call for a summit also underscores the degree to which a once go-it-alone presidency has shifted to embrace not only the necessity of international cooperation, but also a role of global leadership.

"Talk of a Bretton Woods II has been around to different degrees for 30 years. But the fact it is getting started with an outgoing administration and especially one that was at the center of a significant crisis between America and Europe, between America and the rest of the world, suggests the recognition that there is urgency in the air," says Simon Serfaty, an expert in US-Europe relations at the Center for Strategic and International Studies (CSIS) in Washington. "It also adds legitimacy to the coming process."

That process, which is expected to stretch into next year and a new American administration, will get under way with a summit that Bush will host sometime after Nov. 4, the date of US elections, according to a statement issued Saturday by Bush, French President Nicolas Sarkozy, and European Union Commission President José Manuel Barroso.

The initial summit is expected to be a kind of expanded Group of Eight meeting, assembling the leaders of the most industrialized nations and those of major developing economies like China, India, Brazil, and South Korea. It would aim to assess the current global crisis and to come up with a set of principles of reform.

Actual agreements on reforms could come at subsequent summits, but the initial meeting would allow Bush to place his stamp on the process before leaving office, while also facilitating a continuity of American leadership.

Saturday's meeting offered a picture of transatlantic unity, but that hardly means the road ahead will be discord-free. Bush says future reforms and new international regulations must improve but not fetter the free market, while European leaders hint at much more robust state intervention with tighter regulations.

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