It is with great pleasure that I greet and offer warm thanks to Michel Camdessus, [World Bank President] Jim Wolfensohn, and [IDB President] Enrique Iglesias, who have afforded me this occasion to meet with you. My visit is the first by a French head of state to the Bretton Woods organizations, and it is not just a courtesy visit. For me, it is an event charged with great significance. It is both a demonstration of confidence and an urgent plea to the institutions you represent.
I would like, first, to recognize the work already accomplished. I fully realize the difficulties and responsibilities involved. Your organizations have served global development well. France has confidence in them and fully supports their efforts at adapting themselves to better serve the needs of the twenty-first century.
The world of today is very different from the postwar world that led to the creation of your institutions. The globalization of markets, capital, and economies has become a reality, and the need for cooperation, coordination, and risk sharing is more necessary than ever. This new world confers important new responsibilities upon you.
We need to better organize the global economy, and you must be at the forefront of this effort. Representing the whole community of nations legitimizes your role. This is why France is in favor of increasing the resources necessary for your mission, whether it be for quotas and for financing the Enhanced Structural Adjustment Facility at the IMF, for IDA [International Development Association] at the World Bank, or for the resources of the IDB.
But there must be something to counterbalance the expansion of your roles and the confidence that governments place in you: the general policy orientation of your institutions must be defined by the political authorities of your shareholders. Ministers in the governing bodies must act side by side with the respective Boards of Directors, whose roles are irreplaceable, to give impetus to, and provide democratic oversight for, the policy directions adopted. This is the spirit in which France has proposed transforming the Interim Committee of the IMF into a decision-making body, as provided for in its statutes. The same should go for the Development Committee of the World Bank.
Financial Stability and Growth
I would also like to take advantage of our meeting to tell you my thoughts on the need to increase international financial stability and on the crucial struggle against poverty and exclusion. The world needs stability to achieve growth. We will never completely avoid crises, but we must do everything in our power to anticipate them and to limit their effects. The financial crisis that developed over the past two years illustrates the fragility of our system. In today’s globalized world, no country is safe from the shocks that strike its neighbors.
The financial community, it is true, has been able to mobilize and face up to the situation, thanks to strong intervention by the IMF and the World Bank and to the financial support of the Group of Seven. Europe and France were, as you know, neither inactive nor indifferent. We have fully assumed our share of the requisite efforts. But, beyond the short term, more far-reaching responses are called for, which must withstand two temptations. The first is to blame globalization for all our troubles. I do not think this is justified. We must not stigmatize a development that is the source of the exceptional recent growth of world trade. Globalization has permitted countries that only 10 years ago were still part of a rigid system of state-run, centralized economies to be rapidly integrated into the world economy.
The second stumbling block we must avoid is the temptation to resort to backward-looking and inappropriate solutions. Let us acknowledge that market liberalization has occurred in a disorderly manner. Banking systems have often been too fragile to carry out the tasks incumbent upon them. Even so, the way out is not to be found in fear, or retrenchment, or outmoded approaches. The problems we must solve call for pragmatic solutions, not ideological responses. It is not a question of backing away from free capital movements and repartitioning economic life. Nor is it a question of seeking a new financial protectionism, which would be rapidly followed by a new trade protectionism, making victims of us all.
New Financial Architecture
Let us rapidly build the “new financial architecture” we so need. Let us reform the Bretton Woods system. We know the reforms that must be achieved. Of course, we must first implement good economic policies in each of our countries. But, it is also necessary to increase transparency, both in member countries and in the international financial institutions. We must increase our capacity for crisis prevention. We must adopt a veritable “traffic code” or “highway code” for capital flows, a code that applies to all, including hedge funds and offshore establishments. The private sector must participate in the resolution of crises. We must identify and define the role of “lender of last resort” for the world financial system.
Nineteen ninety-eight was a year for reflection and for stemming the crisis; 1999 must be the year of decision and reform. I am counting particularly on the IMF to take the lead in this field, for the world remains fragile.
I expect much from the next meetings of the Interim Committee of the IMF and the Development Committee of the World Bank and from the annual meeting of the IDB, which I will have the pleasure of welcoming to Paris. This will be an occasion for me to pay special and sincere tribute to Enrique Iglesias.
At the summit in Cologne next June, the Group of Seven will dedicate a major part of its work to the reforms being prepared. And, you are aware that France has proposed a summit in Paris to bring together, notably, the heads of state or government of the IMF Interim Committee member countries, if possible this autumn. Its purpose would be to officially adopt the reforms and to give them the requisite international legitimacy.
Expectations are great. These are the spheres where the heads of state or government must squarely face their responsibilities. I intend to fully exercise my own responsibilities. Since January 1, 1999, our country, along with 10 of its European Union partners, has a new currency—the euro—whose creation contributes to international stability. The euro holds out the promise of growth and employment if we implement the appropriate economic, structural, and social policies. Europe must be a high-growth zone. As the leading world economic power, Europe must play its role as the engine of world growth.
Shifts among the euro, the yen, and the dollar will dominate the international scene. One cannot hope for world financial stability while, at the same time, accepting unstable exchange rates. We must aim for more stable relations between currencies. This is a daunting task. At a time when so many emerging countries are making a considerable effort to surmount their difficulties, we must move forward together to maintain a global environment that fosters growth.
Strengthening stability goes hand in hand with the fight against poverty and the social consequences of crisis. This is a political problem. Growth and economic development are the foundations of democracy: we know that demagogues find fertile ground when confidence in the future is shaken. That is why the IMF, the World Bank, and all development banks must take concerted action. A globalization that does not benefit humanity and help it flourish is unjustifiable. We must take care that globalization leaves no country by the side of the road.
This is the intent of France’s course of action in support of public development aid. Concerned by the worrying decrease in contributions, France is advocating, in every forum, real solidarity between nations on this issue. This is the intent of our initiatives and proposals aimed at finding a solution to the painful, chronic problem of debt in the poorest countries. We have made progress, but not enough. We must push ahead. I hope the Cologne summit will help us. There, I want us to express, in a decisive way, our determination to alleviate the burden of the poorest countries. This problem, which is dealt with in the Paris Club, is increasingly becoming a multilateral debt problem. Balanced and shared efforts will thus be necessary to find a solution.
At the next meeting of Group of Seven finance ministers, Dominique Strauss-Kahn [French Minister of Finance] will propose, on behalf of France, an initiative based on three principles: greater generosity toward indebted countries; a sharing of effort among creditor countries, which is only just; and a serious effort on the part of the countries concerned to strive for better management and better governance.
I would like to acknowledge the generous vision and action of Jim Wolfensohn. He gave the impetus to the Bank’s new global strategy, highlighting the social and environmental dimensions of development. Yes, we must give priority to education and human development. Develop the rule of law in all countries. Fight corruption. Assist in better public sector management. This international solidarity must translate into a real priority for the poorest countries, notably in Africa.
So, here are France’s goals: to fight poverty, prevent crisis, and better ensure financial and monetary stability and, through these efforts, to achieve stronger, more balanced world growth that will benefit everyone and, above all, democracy. In a word, as U.S. President Clinton so rightly put it, “to humanize globalization.”