Turbulence provides opportunity for reform

Writing in The Financial Times, the PM suggested ways to "fix the world's financial system" in light of the global credit crunch. Leaders gathering at this weekend's World Economic Forum in Davos, Switzerland, are in agreement that the world economy is facing its "biggest test in more than a decade", he said.

The PM said:

"...turbulent conditions, throughout history, have been an opportunity for reform. This latest test of world financial systems presents a window in which to address fundamental issues that, if tackled properly, will improve economic management, regulation and the fight against inflation, and help us prevent similar crises in the future."

Mr Brown pinpointed four steps to be taken in dealing with the ongoing economic turmoil. First, there should be a repricing of risk after recent underpricing and a move to greater transparency.

Second, the International Monetary Fund should be made more independent and the international community should increase cooperation by adopting a common approach and building an "early warning system" for potential crises.

Third, governments should do more to use their fiscal policy [matters relating, for example, to budgets and taxation] to their support monetary policy [relating, for example, to interest rates and inflation].

Fourth, all nations should refrain from turning to protectionist measures [such as placing tariffs on imports] and instead pursue free-trade policies based on the understanding that the phenomenon of globalisation is an opportunity and not a threat.

The Prime Minister will be engaged in a number of discussions, forums and roundtable meetings in Davos throughout the day. At a televised discussion on his arrival this morning, he repeated his warning that governments should not fall back on protectionism and over-regulation during "testing times".

Source: By 10 Downing Street