International cooperation, not protectionism, is the precondition for global financial system reform, world leaders and financial experts told this year's World Economic Forum Annual Meeting, held in Davos from Jan. 28 to Feb. 1.
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Participants are seen during the traditional farewell buffet lunch at the World Economic Forum (WEF) Annual Meeting 2009 in Davos, Switzerland, Feb. 1, 2009. The World Economic Forum (WEF) wrapped up its annual meeting here Sunday, with pledges of cooperation from world leaders and elites in tackling the global financial crisis. [Xinhua Photo]
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Fight against financial protectionism
During the five-day forum, participants sent a strong message to combat financial protectionism. British Prime Minister Gordon Brown warned that financial protectionism is a greater danger than trade protectionism in the current world economic scenario.
Cooperation between major powers and global financial institutions is vital to ensure a continued flow of credit to developing and smaller countries, which are likely to be the biggest victims of the recession, he added.
There is an implicit protectionism in what is happening now, said Brown, referring to the moves of several countries to restrict government funding for bolstering endangered banks to national financial institutions and barring overseas operations from benefiting.
This is leading to the withdrawal of capital from these institutions' foreign operations. "If this continues, what you will see is a form of financial protectionism and financial isolationism," he said.
Developing countries, likely to suffer most in the global crisis due to their still weak domestic financial sector, have already seen a dramatic loss of capital, Brown added.
Meanwhile, German Chancellor Angela Merkel said the global financial crisis may lead to the formation of a UN Economic Council, like the UN Security Council, based on a global economic charter.
Reform international financial institutions
Participants at the forum agreed that one of the important steps for reforming the global financial system would be to rebuild International financial institutions such as the International Monetary Fund and World Bank.
According to Brown, new forms of international institutions are vital to tackle future problems.
The IMF should take a greater role in heading off crises and preventing them rather than dealing with the after-effects, while the World Bank should tailor its operations to better deal with environmental issues, he suggested.