LONDON, March 28 (Reuters) - Britain should offer to give up its single seat on the International Monetary Fund (IMF) to demonstrate leadership and the need for reform at the G20 London summit, a think tank report said on Saturday.
The report also called for world leaders to agree at next week’s meeting to share the burden of stimulus packages, provide additional IMF funding, reject protectionism and make longer-term reforms.
Britain’s Chatham House and the Atlantic Council of the United States argued that an offer by Britain to quit its seat as part of a consolidation of European representation and a shift towards emerging markets would send a useful signal.
“By making this radical offer, Britain would demonstrate strong leadership on the need to reform the governance of the international financial system,” the report said. “It would also serve as a critical signal for immediate action by the G20 leaders to kick-start the world economy and make this summit a success.”
Emerging economies such as China and India want a much greater say in the running of multinational institutions including the IMF and World Bank, which have been dominated by major Western powers since they were formed after World War II.
The report recommended that rather than recommending a one-size-fits-all stimulus package, world leaders should agree on how they should share stimulating the global economy.
SPECTRE OF 1930s
Some European leaders have voiced scepticism over following the United States and Britain in launching large public sector stimulus spending packages, but the report’s authors said there was little choice even if it meant effectively printing money.
“If the burden of stimulating the economy ends up being taken mainly by the United States, that in itself is likely to lead to protectionism,” said Jim Rollo, a professor at Sussex University and one of the contributors to the report.
“Countries would then try and tailor their stimulus packages to make sure the money didn’t end up going abroad and that would not be good.”
The report said the U.S. and other key countries needed to follow Japan and the European Union in pledging money to the IMF and announce a 12-month freeze on new protectionist measures, including those allowed by the World Trade Organisation.
For the longer term, it said the G20 should agree to strengthen international financial regulations, including for credit derivatives and other complex investment vehicles which some have blamed for helping to deepen the impact of the Western mortgage and bank crisis.
It said a major increase in IMF funding capacity was necessary, accompanied by reform of its management and voting weighting as well as the setting up of a “caucus on currency misalignments” to address long-term economic imbalances.