Rebuilding the international monetary order: the responsibility of Europe, Japan and the United States

One of the principal conditions to assure the long-term development and
success of the liberal international economic and political order is the return to
a stable, equitable and rule-based international monetary order.
This is in the interests of large and small, rich and poor and “emerging” countries alike.
In fact, the absence since the 1970s of a universal monetary order and the prevailing
monetary nationalism and regionalism at a time of globalization and global
finance have been responsible for a lack of equitable adjustment mechanisms
and of effective checks and balances on financial and fiscal excesses in the world
economy. The recurring financial crises have been hurting the economies not only
of the poorer but by now also of the richest economies.
The task of designing, negotiating and implementing a new international monetary order is clearly a
combined political and economic and security challenge.
A possible approach for a new design could be inspired by the original “European Monetary System”
(EMS). The responsibility for this initiative for an “Extended EMS” belongs first
and foremost to the three principal market economies: the United States, the
European Union and Japan. From the start this “Extended EMS” would benefit
the entire world economy – including the major new powers such as Brazil, China
and India, and the weaker economies that suffer the most from the recurring
financial crises. In the long run it would also be open to new members in order
to become a truly universal system. But it is only the commitment and active
participation of the three main pillars of the liberal international economic order,
the US, Europe and Japan could be the guaranty of success: the absence of
either one of the three would inevitably lead to failure with dire consequences for
the outlook for an integrated and prosperous world economy
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