LONDON (Reuters) - The world needs a new Bretton Woods agreement to make the architecture of the global financial system fit for purpose in the 21st century, Prime Minister Gordon Brown said on Monday.
In 1944 the Bretton Woods conference helped draw up the post-war world financial order and created the International Monetary Fund and World Bank. Brown said the old rules had been found wanting in the modern era.
“Sometimes it does take a crisis for people to agree that what is obvious and should have been done years ago can no longer be postponed. But we must now create the right new financial architecture for the global age,” Brown said in a speech at the London offices of Thomson Reuters.
His comments came after his government committed to putting in 37 billion pounds of new capital into banks on Monday, potentially making it the largest shareholder in Royal Bank of Scotland and Lloyds TSB in its most dramatic salvo yet against the global credit crisis.
Governments in the euro zone also said on Monday they would follow Britain’s lead and recapitalise their banks and move to guarantee interbank lending in a bid to unfreeze wholesale markets.
Brown said these steps should help ease the strains in the financial system which in the last month has felled institutions like the giant U.S. investment bank Lehman Brothers but more longer-term measures were needed to prevent future crises.
He said he would push his plan at a meeting of European Union heads of government on Wednesday, adding he had first mooted the idea 10 years ago but found few takers at the time.
Brown said he had also been talking to U.S. President George W. Bush and had reached the basis for common agreement. Leaders of the Group of Eight countries are expected to meet for a summit in the next few weeks.
The crisis has helped the fortunes of the former chancellor whose government was only a month ago lagging by more than 20 points to the opposition Conservatives in the opinion polls.
But he still faces an uphill battle if his Labour Party is to win the next election, which must take place by mid-2010, after 11 years in power as the economy is slowing sharply and is likely to get worse over the coming year.
Brown ducked questions over his own political standing, saying he was focussed on doing whatever it took to end the financial crisis.
“Action for financial stability should be accompanied by wider economic co-operation such as that which began last week with the co-ordinated action on interest rates,” he said.
“We must now reform the international financial system around agreed principles of transparency, integrity, responsibility, good housekeeping and co-operation across borders,” he said.
Italy has said it will propose broadening the Group of Seven nations and give new tasks to the IMF and World Bank, when it assumes the rotating presidency of the G7 in January.
German President Horst Koehler, a former head of the IMF, has also called for the staging of an international conference along the lines of the one held in Bretton Woods.
French President Nicolas Sarkozy, who holds the European Union presidency until the year-end, has made similar demands.
Reporting by Mike Peacock, Jodie Ginsberg and Sumeet Desai, editing by Chris Pizzey