The world must work together as never before to deal with the global economic crisis, the president of the European Commission warned today.
The financial turmoil will dominate discussions at a two-day 43-nation Asia-Europe meeting which opens tomorrow in Beijing, said Jose Barroso.
Leaders hope the summit will help build consensus on a response to the crisis before a November 15 meeting in Washington.
“We need a co-ordinated global response to reform the global financial system. We are living in unprecedented times and we need unprecedented levels of global co-ordination,“ Mr Barroso said.
”It’s very simple. We swim together or we sink together.“
China’s hosting of the two-day gathering, known as ASEM, highlights its growing importance to the world economy and standing as the EU’s biggest trading partner.
However, in a sign of Europe’s enduring political differences with China, the European Parliament today gave the EU’s top human rights award to Chinese dissident Hu Jia despite a warning from Beijing that his selection would seriously harm relations.
Conservative foreign affairs spokesman in the European Parliament Charles Tannock said giving the Sakharov Prize to Hu showed EU politicians would continue to highlight the “authoritarian and repressive nature of the communist government” in China.
ASEM is essentially a talking shop on issues from human rights to climate change and has no mandate to make decisions. Even forming a consensus on how to handle the crisis will be a challenge for a grouping whose members differ widely on views toward international cooperation and intervention by global bodies.
Free-trading Singapore and economic powerhouse Germany are attending but so too are isolated, impoverished Burma and landlocked, authoritarian Laos.
While outlining no specific proposals, the former Portuguese prime minister said a solution needed to be based on principals of transparency, responsibility, cross-border supervision and global governance.
The worst global financial crisis in seven decades pointed to the need for a “major reform” of the world’s financial system, he said.
“The latest events have made clear that the current model of financial regulation and supervision needs to be revamped at the international level,” Mr Barroso said. “We need Asia to be on board.”
The collapse of the US housing market has prompted a credit freeze in the United States and around the globe that could severely affect economic growth.
Drastic actions by the Federal Reserve and the US administration have yet to turn the economy around. Businesses are reluctant to hire and boost capital investments, consumers have hunkered down and all the economy’s problems are feeding off each other.
The chaos has spread to the EU’s financial sector and into the economic mainstream, sending growth rates plummeting.
Although Asian economies had less direct exposure to the toxic sub-prime mortgages that are wreaking havoc on US and European markets, they expect to take a major hit from a drop in exports and foreign investment.
The vice president of the Bank of China, one of the country’s main state-owned lenders, said he expected the crisis to start to bite over the next six months.
“We shouldn’t think this is going to be over soon. The key issue for Asian countries is to prevent the banking crisis from turning into to a currency crisis,” Zhu Min said.
“This is going to be a long and cold winter.”
Even before the crisis hit last month, China’s juggernaut economy was beginning to slow. Growth in the third quarter of this year was 9.9%, which, although the fastest among the largest economies, was down from 11.9% for all of 2007. The World Bank says a further retreat is expected next year.
One of the hardest-hit, Pakistan, has sought help from the International Monetary Fund to avoid defaulting on billions of dollars in loans and solve a financial crisis brought on by high fuel prices, dwindling foreign investment and soaring militant violence.
South Korea’s stock market, meanwhile, slumped to a three-year low amid heavy selling by foreign investors.