Blair seeks global finance talks

Click to follow
TONY BLAIR will call for an international economic summit to discuss ways to pull the world back from the brink of recession when he speaks to the United Nations in New York today.

He will also demand a shake-up of the International Monetary Fund (IMF) and World Bank.

The Prime Minister, current chairman of the G7 industrialised countries, will say there needs to be a second Bretton Woods - the conference held in July 1944 to avoid global recession after World War Two, which set up the IMF.

During the day-long trip to the United States, Mr Blair will show his support for President Bill Clinton over the Monica Lewinsky affair. The release of tapes and transcripts of Mr Clinton's evidence to the grand jury is certain to overshadow Mr Blair's attempt to focus on global economic problems.

Mr Clinton and Mr Blair will appear together on a platform at a seminar on the strategy for a "third way" between free-market economics and old- style state socialism.

Writing in The Independent today, Mr Blair says he believes the "third way" offers a way of reconciling philosophies usually seen as antagonistic. "It is not an attempt to split the difference between right and left. It is about traditional values in a changing world."

Mr Blair is understood to be seeking a world summit, possibly in October, to try to prevent the turmoil in the Far East and parts of South America becoming a global economic slump, as happened in the 1930s. The summit would include many of the countries facing difficulties. It could mean increasing the funds available for the IMF to bail out countries in a debt crisis.

The obvious parallel is Bretton Woods, when representatives from 44 countries met in New Hampshire to prevent a financial collapse after World War Two. It resulted in the International Bank for Reconstruction and Development (the World Bank), to make long-term loans for development projects, and the International Monetary Fund (IMF), to finance short-term deficits.

Mr Blair's officials said that the Prime Minister's proposals for reform should not be taken as criticism of the IMF. "It is an acknowledgement that the existing system is not serving us terribly well in relation to the crises that have erupted in recent times."

The Prime Minister will propose much greater openness in international and national financial dealings; better supervision of the financial institutions - to tackle the bad debt problem in Far East banks; adequate resources for the international financial institutions and improved accountability; and an improvement in the ability of the international community to respond to short-term crises, and to handle capital flows, such as the run against the rouble.

His call comes as the Centre for Economics and Business Research (CEBR), an independent economic think tank, predicts that UK GDP growth for 1999 will be 0.4 per cent, well down on predictions of 1.8 per cent made last June. The report claims there is danger of "a precipitous turn in the UK stock cycle", causing a contraction in UK manufacturing of 2.3 per cent, and that growth in the service sector will slow almost to a standstill.

The G7 last week hinted at a world cut in interest rates when it said the "balance of risks in the world economy had shifted" but the US Federal Reserve shares German caution about cutting rates.