Will Straw reports on former prime minister Gordon Brown’s comments at the Global Progress Conference in Madrid.
Gordon Brown today told a meeting of progressives from over 20 countries that the eurozone crisis had to be seen as a banking and finance crisis rather than purely a crisis of deficits, debt and profligacy. He was speaking at the start of the third Global Progress conference in Madrid, organised by think tanks from Spain and the US.
The former prime minister told delegates the crisis in the eurozone was due to four problems in then European banking system:
• High leverage ratios (of 32:1 in Germany and 26:1 in France compared to 10:1 in the US);
• Low levels of bank recapitalisation (1% in Europe compared to 4% in the US);
• Too few toxic assets written off in Europe;
• A lack of progress in agreeing global financial standards.
Mr Brown concluded by saying:
“This crisis started as a banking crisis, continued as a finance crisis and can only be resolved with banking reform.”
He called for the European Council on October 23rd and the G20 on November 4th and 5th to focus on financial sector reform.
Describing the changes in the global economy over the last 20 years as the “biggest economic change in world history”, Brown argued for a global growth pact involving greater consumption in China, greater openness to trade in Asia, and more infrastructure spending in the US and Europe.
He said the IMF judged that a pact of this nature would deliver 4% growth by 2014, 25 to 50 million jobs, and pull 100 million people out of poverty. Without it, he said the global economy would face “mutually assured downturn”.
Mr Brown was joined on stage at the conference organised by Fundacion Ideas and the Center for American Progress by Felipe Gonzalez, former prime minister of Spain, Pravin Gordhan, South African finance minister, Poul Nyrup Rasmussen, President of the Party of European Socialists, Alfred Gusenbauer, former Austrian chancellor, and Gordon Bajnai, former Hungarian prime minister.
Mr Gordhan criticised the favoured austerity policies of George Osborne and said the G20 was “extremely challenged” in producing the same coordination and response as it had produced under Brown’s leadership in 2008/09.
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