G-7 unsuited to global crisis - World Bank

http://cnnmoney.mobi/money/business/economy/detail/97289
October 06 2008: 02:43 PM EDT

The Group of Seven industrialized countries is outmoded and should be replaced with a new entity that would include growing economies in Asia and Latin America, World Bank President Robert Zoellick said Monday.

He said the financial crises roiling markets in the United States and Europe are an alarm for the world and demonstrate the need for a broader-based system to handle them.

"The G-7 is not working," he said. "We need a better group for a different time. For financial and economic cooperation, we should consider a new steering group including Brazil, China, India, Mexico, Russia, Saudi Arabia and South Africa and the current G-7."

Russia set to join

The G-7 brings together the United States, Canada, Britain, France, Germany, Italy and Japan. When Russia joins the group for political discussions, it becomes the G-8.

Speaking before weekend meetings of the bank and its sister institution, the International Monetary Fund, Zoellick said the new group would not be a G-14.

"We will not create a new world simply by remaking the old," he said. "It should be numberless, flexible, and over time, it could evolve" to fit changing circumstances, including new emerging powers, while serving as a network for frequent interaction.

"We need a Facebook for multilateral economic diplomacy," Zoellick said in a speech to the Peterson Institute for International Economics in Washington, referring to the social networking site.

"These rising powers need to be heard," he said. "They want to know what their role will be in making the new rules for the global economy. Having demonstrated their competitive success, these rising powers are suspicious that the more established stakeholders will hold them back, whether through old rules of trade and finance or new rules for climate change and the environment."

Economics on global agenda

The G-7 was formed in 1976 to bring together finance ministers from member countries who meet several times a year to discuss economic matters. Besides Zoellick, other officials in developed and developing countries have called for the G-7 to become more representative of the global economy.

Zoellick said the IMF, the World Bank and perhaps the World Trade Organization could help support the new group by identifying emerging problems, supplying analyses, suggesting solutions and drawing on "our own broader membership to propose coalitions to address issues."

The World Bank and the IMF were established in the World War II's last days to stabilize the international economy. They now have 185 member nations.

Zoellick, a former U.S. diplomat, trade negotiator and business executive, said economic multilateralism needs to be redefined beyond its traditional focus on trade and finance. He said energy, climate change and stabilizing fragile and post-conflict states are economic issues and not just part of the global dialogue on security and development.

Developing countries

Turning to developing countries, Zoellick warned that the financial crisis could be a tipping point for many of them.

"Deceleration of growth and deteriorating financing conditions will trigger business failures and possibly banking emergencies," he said. "As is always the case, the most poor are the most defenseless."