Leaders call for urgent financial reforms

WATFORD (Reuters) - Centre-left leaders from around the world called on Saturday for urgent reform of global financial institutions to prevent a recurrence of the credit crisis.

International Monetary Fund Managing Director Dominique Strauss-Kahn is shown in this file picture. REUTERS/Afolabi Sotunde

About a dozen leaders, brought together by Prime Minister Gordon Brown, issued a communique urging the International Monetary Fund to help develop an effective early warning system to guard against financial risks to the global economy.

Australian Prime Minister Kevin Rudd said the world had to learn the lessons from the credit crisis, sparked eight months ago by massive default on U.S. sub-prime mortgage debt.

“Too often in the past when these sorts of events have occurred ... the lessons are lost. The lessons must be learned and applied, otherwise we will face a very rocky future indeed,” Rudd told a news conference after the “Progressive Governance” conference outside London.

The leaders, also including South African President Thabo Mbeki, New Zealand Prime Minister Helen Clark and Austrian Chancellor Alfred Gusenbauer, gathered just before key Group of Seven and IMF meetings in Washington next week which will discuss the financial turbulence.

Also attending were the heads of the IMF, World Trade Organisation (WTO), the African Development Bank and several U.N. agencies.

The leaders heard a gloomy economic update from IMF Managing Director Dominique Strauss-Kahn, who said most of the downside risks to the world economy feared six months ago had now become a reality.

“The forecasts we are going to release in a few days are not really improving,” Strauss-Kahn said.


The IMF is due to release its twice-yearly World Economic Outlook next week.

Earlier in the week, the IMF cut its 2008 outlook for world economic growth for the second time this year -- a move that acknowledged housing and credit problems in the United States were exacting a heavy toll on the global economy.

The IMF now expects global growth to slow to 3.7 percent this year, down from its January forecast of 4.1 percent.

Brown said there was general agreement among the leaders on the need for new rules for disclosure and transparency for financial institutions.

Brown is pressing for global, rather than national supervision of financial markets and for banks to come clean on the losses they have suffered due to the sub-prime crisis.

Developing country leaders said rising food and energy prices were hitting poor countries hard.

Donald Kaberuka, president of the African Development Bank, warned that many African governments were straining their budgets by handing out food subsidies to help their populations cope with rising prices.

One bright spot was talk of improving prospects for a breakthrough in the long-running talks on world trade liberalisation.

WTO chief Pascal Lamy said the Doha round of talks were “inevitably long and complex”.

“My feeling is that we are now reaching a stage where it (an agreement) could happen,” he said.

Editing by Sami Aboudi