PARIS (Reuters) - French President Nicolas Sarkozy said on Monday that his G20 agenda to reform the international monetary system would look at widening the role of the IMF’s Special Drawing Rights and tackling international capital flows.
France, which took over the presidency of the G20 group of industrial and developing nations last month, is sounding out governments on ways to reform a monetary system dominated for decades by the U.S. dollar with the aim of creating greater global stability.
“We need to start thinking about the relevance of a system based on accumulation of dollar reserves,” Sarkozy said, adding that France would float proposals during the next year.
“Does not this system make part of the world dependent on American monetary policy? Should we not reflect on the role of the SDR (Special Drawing Rights) and on the internationalisation of other currencies?” asked Sarkozy, in a speech to mark the 50th anniversary of the Organisation for Economic Co-operation and Development (OECD).
French officials have said they hope to encourage greater use of the Chinese yuan as a reserve currency during their G20 presidency, including talks on a possible timetable for its inclusion in the basket of currencies which underpin the International Monetary Fund’s Special Drawing Rights.
Other ideas include encouraging a greater role for the SDR itself as a reserve currency, in an effort to move away from dollar hegemony.
China is keen for the IMF to broaden the currencies that make up its SDR international reserve assets from the current basket of dollars, euros, yen and sterling.
China wants to promote the use of SDRs for pricing commodities and in global trade. Russia has championed SDRs and recruited fellow emerging heavyweights China, Brazil and India to promote it as a reserve currency.
Sarkozy said his agenda was not aimed at harming the dollar, which he insisted should remain strong and retain an “eminent” role.
“But eminent does not mean exclusive,” he said, noting the system needed to reflect the emergence of new economic powers. “Our monetary organisation cannot sustainably continue to reflect the world of yesterday in which neither India, nor China nor Brazil were the economic powers that they are today.”
The 34 countries of the OECD — which do not include big developing economies like China — will account for just 50 percent of the global economy by 2015, versus 65 percent in 1975, he said.
France’s G20 aims also include measures to curb the volatility of commodity prices and to discuss ways of improving global economic governance.
Sarkozy said that G20 leaders should consider means of controlling the damaging effects of massive capital flows, including the creation of “financial safety nets.”
“Experience has shown us that uncontrolled financial liberalisation can expose our countries to systemic financial crises,” Sarkozy said. “We need clear international rules of the game and institutions to make them respected.”
With regard to commodities, Sarkozy said there was no question of reversing free market principles, but rather France would seek ways of “discouraging speculation and offering transparency of the evolution of supply and demand.”
Writing by Brian Love and Daniel Flynn; Editing by Susan Fenton