(Reuters) - Here are some details about the financial architecture established in 1944 by the Bretton Woods Conference, which European leaders now say needs updating:
-- With World War Two drawing to a close and Japan and Europe in ruins, the world’s economic elite gathered to build a framework for economic cooperation that would avoid a repetition of the cycle of competitive devaluations that had contributed to the Great Depression of the 1930s.
-- The Conference established the International Monetary Fund and the World Bank, set the gold standard at $35 an ounce and chose the dollar as the cornerstone of world currency exchange.
-- Bretton Woods was blown apart by the strains produced by the war in Vietnam and effectively suspended by President Richard Nixon in 1971. This meant the U.S. would no longer honor the agreement which made the U.S. dollar the world’s reserve currency, and allowed other countries to convert their US-dollar holdings into gold.
-- In 1994, calls for more stability resurfaced after the dollar tumbled to a series of post-World War Two lows against the Japanese yen and central bankers and politicians worried about the onslaught of speculators in foreign exchange markets.
-- Britain’s Prime Minister Gordon Brown has led calls in the wake of the current financial crisis for a review of the global financial institutions established by Bretton Woods, arguing they are no longer fit to oversee this century’s heavily-interlinked financial centers.
-- Britain has called for the IMF to work more closely with the Financial Stability Forum grouping top financial regulators to warn of risks to global macroeconomic and financial stability.
-- Italy, which takes over presidency of the Group of Seven rich powers in January, has said it will propose reforms including a review of rules on international trade, foreign exchange and capital movements.
“Today the dollar is the currency of Bretton Woods, but now it could be that there will be other combinations,” Italian Economy Minister Giulio Tremonti said.
-- THE WORLD BANK - The World Bank officially began operations in June 1946. Its first loans were geared toward the post-war reconstruction of Western Europe. Beginning in the mid-1950s it plays a major role in financing investments in infrastructure projects in developing countries.
-- IMF - Financial operations began in 1946. Its aims include surveillance of economic and financial developments, lending to countries with balance of payments difficulties, supporting policies aimed at correcting the underlying problems, poverty reduction and technical assistance.
“Surveillance involves the monitoring of economic and financial developments, and the provision of policy advice, aimed especially at crisis-prevention,” the IMF’s website says.
Sources: Reuters; IMF; World Bank; www.brettonwoodsproject.org/britannica.com/financialsense.com