UN Panel: Poor Must be Part of Financial Overhaul

By EDITH M. LEDERER / AP WRITER

UNITED NATIONS — To prevent another global financial crisis, a panel of UN-appointed economic experts is calling for a major overhaul of the international trade and financial system that includes representatives from all 192 UN member states—not just the 8 major industrialized powers or 20 leading developed and emerging economies that have been calling the shots.

The panel, led by Nobel Prize-winning economist Joseph Stiglitz of the United States, said the overhaul must start with immediate actions to promote recovery from the current crisis, including measures to protect the world's poor.

"Some 200 million people, mostly in developed economies, could be pushed into poverty if rapid action is not taken to counter the impact of the crisis on developing countries," it warned. "Even in some advanced industrial countries, millions of households are faced with the threat of losing their homes and access to health care, while economic insecurity and anxiety is increasing among the elderly as they lose their lifetime savings in the collapse of asset prices."

The panel's preliminary recommendations were released ahead of a three-day General Assembly meeting opening Wednesday on the world financial crisis and its impact on development. It is taking place a week before the Group of 20 summit of rich and developing countries in London tackles the global crisis, and it will be a curtain-raiser to a UN conference in June which world leaders will be invited to attend to focus on reforming the international financial system.

According to the panel, "loose monetary policy, inadequate regulation and lax supervising interacted to create financial instability" that rapidly spread around the world.

"Without a truly inclusive response, recognizing the importance of all countries in the reform process, global economic stability cannot be restored, and economic growth, as well as poverty reduction worldwide, will be threatened," it said.

"This inclusive global response will require the participation of the entire international community; it must encompass more than the G-7 or G-8 or G-20, but the representatives of the entire planet, from the G-192," the panel said.

In addition to the United States, other members of the panel were from Russia, Egypt, France, Britain, Tanzania, Colombia, Ecuador, Barbados, India, Brazil, Japan, Nigeria, Germany, China, Malaysia and the United Nations.

It recommended a number of immediate measures to deal with the crisis and lay the basis for long-range reforms—first and foremost that all developed countries take "strong, coordinated, and effective actions to stimulate their economies."

This proposal already faces an uphill struggle.

While the United States, China and some other countries have announced major stimulus packages, the European Union, led by Germany and France, has steadily refused calls for more coordinated spending. It wants, instead, to focus on fixing the broken banking system, improving financial regulation, and providing more money to the International Monetary Fund to loan to governments in trouble.

The panel called for industrialized countries to dedicate 1 percent of their stimulus packages—in addition to their regular international aid programs—to spending in developed countries to offset the impact of the decline in world trade and problems in financial markets.

And the panel called for additional funding for developing countries through larger loans from the IMF, regional programs, and the creation of a new credit facility with strong representation from developing countries, possibly under the umbrella of an international institution like the World Bank.

Although a new global trade treaty remains stalled, the panel said a number of measures that have already been agreed to during the negotiations could be implemented rapidly to support developing countries hit by the financial crisis. These include duty-free, quota-free market access for products from the world's poorest countries and the elimination of all export subsidies by developed countries, it said.

As for longer-term reforms, the panel called for a new global reserve system using a broad basket of world currencies, major reforms to the IMF and World Bank to improve transparency and give greater voice to developing countries, and creation of an internationally representative forum to address concerns about how the financial system is functioning.

Such a Global Economic Council—at a level equivalent to the General Assembly and the Security Council—should hold an annual summit of world leaders to assess developments and determine future actions, it said.