- The Washington Times - Wednesday, October 1, 2008

Leaders and economists from Western Europe to East Asia Tuesday urged the United States to go beyond reviving a failed domestic bailout and start working on a new global financial system.

“The Americans don’t have a choice — they must absolutely have a global plan,” Christian Noyer, head of the French central bank, said in Paris.

David Smick, a global strategist and author of “The World Is Curved: Hidden Dangers of the Global Economy,” said the next U.S. president should immediately call for a second “Bretton Woods” conference to devise a new doctrine of international finance.

The tiny New Hampshire town hosted a conference shortly after World War II that established rules for economic interchange among the world’s industrial powers and created the World Bank and International Monetary Fund.

“I am convinced that the sickness runs deep and that we need to rethink the entire financial and monetary system, as we did in Bretton Woods … to create the tools for worldwide regulation made necessary by the globalization of trade,” French President Nicolas Sarkozy said in the French city of Toulon on Monday.

He said that officials from France, Britain, Germany and Italy will meet next week in Paris with the Continent’s top financial officials to prepare for a proposed global summit on the economic crisis. European Central Bank President Jean-Claude Trichet will participate.

The 27-nation European Union said Tuesday that the crisis “has become a global problem” and Washington has a “special responsibility” to resolve it.

German Chancellor Angela Merkel took aim at the House failure to pass the Bush administration’s $700 billion bailout proposal, which sparked a global stock market plunge. She called the package a “precondition for creating new confidence in the markets.”

Kaoru Yosano, the Japanese minister of economic and fiscal policy, agreed. “The outcome has caused a major impact on not only the U.S. economy but also the world economy,” he said.

Until a few weeks ago, foreign governments were blase and even gloated about U.S. financial woes, Mr. Smick said. “The decoupled theory has taken a crash landing,” demand is plummeting worldwide and foreign financial institutions have been forced to come to terms with their own “toxic waste,” he said.

EU officials blamed U.S. policies and business practices for the meltdown, while the Vatican denounced corporate greed.

“The United States must take its responsibility in this situation, must show statesmanship for the sake of their own country, and for the sake of the world,” said European Commission spokesman Johannes Laitenberger. “The turmoil that we are facing has originated in the United States.”

The Bush administration sought to calm politicians and markets, assuring them that it has been “reflecting” on developments and promising long-term solutions.

David McCormick, undersecretary of the Treasury for international affairs, said Washington will take into account any potential global impact when it makes decisions about “how the U.S. regulatory structure should evolve.”

However, the State Department said the United States had to pass its own legislation first.

“There will be time to consult with countries about what’s going on and what steps we may take,” spokesman Robert Wood told reporters. “But right now, the work has to be done by the administration and Congress.”

In the meantime, foreign governments and financiers took steps to stop the contagion from spreading.

Mr. Sarkozy met with France’s leading bankers and insurance chiefs and promised to announce new measures to tackle the situation by week’s end.

European central banks and the Bank of Japan injected more cash into the market.

The Bank of England said it was offering up to $10 billion to a maximum of 10 banks, while the European Central Bank offered $30 billion to banks in an overnight operation, with a minimum bid amount of $5 million and a maximum of $3 billion.

Belgium’s Dexia bank became the country’s second to get a government-assisted bailout in as many days.

The Irish government announced an unlimited guarantee on deposits at six domestic banks a day after the Irish Stock Exchange suffered its greatest fall in history. Finance Minister Brian Lenihan called on fellow EU leaders to follow his country’s example.

The market in Ireland made up for most of its losses Tuesday. Markets worldwide that opened sharply lower gained back much of that value later on hopes that Congress will pass a revised package soon.

Still, trading in Moscow was suspended for part of the day to limit losses. The Russian government has been rolling out measure after measure to address the crisis of confidence plaguing Russia’s banks.

In a further move to assuage fears and ease the credit crunch, Prime Minister Vladimir Putin announced Tuesday that the government will provide up to $50 billion to businesses outside the financial sector.

Other countries in Central and Eastern Europe have been affected to a lesser extent, but officials and business people said that could change.

“It is quite threatening what is going on,” Hungarian Foreign Minister Kinga Goncz said Tuesday during a visit to Washington.

In Croatia, Vilim Klemen, co-owner of a brokerage firm, said: “It’s impossible that the situation in the global marketplace won’t influence the domestic stock exchange.”

• Raisa Sheynberg in Moscow, Lisa Bryant in Paris, Anton Foek in Brussels, James Morrison and Dusan Milijus in Washington contributed to this report.

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