Sarkozy, Obama To Discuss Global Monetary Changes
STEVE INSKEEP, host:
So that's one set of high level meetings. Let's talk about another. The French President, Nicolas Sarkozy, is visiting President Obama today in Washington. The French leader would like to talk about money, in particular he wants to start a dialog about reshaping the world monetary system. France is hosting the G8 and G20 summits of leading industrial nations later this year, and Sarkozy would like to reduce the role of the U.S. dollar as the world's primary reserve currency. Eleanor Beardsley reports from Paris.
(Soundbite of music, French National Anthem)
ELEANOR BEARDSLEY: The New Years Eve address by the president is always a big deal in France. This year, Sarkozy said the economic crisis meant hosting the G8 and G20 summits was a huge responsibility. France, he said, would strive to build a more regulated, less brutal world. And he said there must be radical changes.
President NICOLAS SARKOZY (France): (Through Translator) The system put in place in 1945 is for a world that doesn't exist anymore. Today we have flexible exchange rates and new currencies. What's the sense of a model based on the accumulation of dollar reserves? It's simply unstable and makes part of the world dependent on American monetary policy.
BEARDSLEY: Sarkozys idea to stop the U.S. dollar from being the primary reserve currency would reflect the new reality of a more multi-polar world and the rise of new powers like India, Brazil and China.
In the United States, the talk is all about Chinas undervalued currency. But much of the rest world is also affected by the weak dollar, says Philippe Dessertine, head of Paris High Finance Institute.
Mr. PHILIPPE DESSERTINE (Director, Paris' High Finance Institute): (Through translator) A large majority of countries feel that using the dollar as the only reserve currency is very dangerous. Just look at the Federal Reserve's latest actions, which favors the U.S., but has consequences for the rest of the world. Emerging countries and Europe really want to change that.
BEARDSLEY: Theres been international criticism of the Feds latest efforts to stimulate the U.S. economy through quantitative easing, where dollars are printed to buy U.S. government bonds in order to increase the money supply. Dessertine says the glut of devalued dollars floods developing countries, pushing their currencies up, which quashes their exports and job creation.
Dessertine and many other economists say the dollar will remain king for now, if the world economy doesnt go into recession. But if things get worse, Dessertine says the U.S. will have to work with other nations to reduce the dollars influence.
Nicholas Dungan, a U.S. based advisor with the French Institute of International and Strategic Relations, says America cannot control the international monetary system by itself. But the U.S. is still reluctant to surrender the dollars dominant position.
Mr. NICHOLAS DUNGAN (U.S. based advisor, French Institute of International and Strategic Relations): What Sarkozy is proposing has some uniquely European and indeed some uniquely French aspects to it, particularly with respect to international financial regulation, trying to stabilize currency rates, trying to stabilize commodity prices. Those are not going to be the areas where the United States, and indeed Obama, is most receptive.
BEARDSLEY: Sarkozy is hoping he will succeed in getting world leaders at least talking about a new monetary system. He already has the backing of the leaders of India and China.
For NPR News, Im Eleanor Beardsley in Paris.
INSKEEP: And you hear Eleanor's reports right here on MORNING EDITION from NPR News.
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