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WB: Multilateral System Needs Fundamental Overhaul Amid Current Financial Crisis

World Bank President Robert B. Zoellick said on Monday the way the world tries to solve its economic problems needs to be rethought amid today's global crisis, including turning the Group of Seven into a Steering Group that empowers rising economic states.

Referring to the upcoming US election, Zoellick said the new president will have to move beyond "the firefight of financial stabilization" to address the "economic aftermath."

Whoever wins the White House should work with others in modernizing the multilateral system as there needs to be a greater shared responsibility for the health and effective functioning of today's global economy, he said.

"The G-7 is not working. We need a better group for a different time," Zoellick said in a speech to the Peterson Institute for International Economics, a leading think tank in Washington D.C.

"For financial and economic cooperation, we should consider a new Steering Group including Brazil, China, India, Mexico, Russia, Saudi Arabia, South Africa, and the current G-7," he said.

Speaking ahead of the Annual Meetings of the World Bank Group, Zoellick said the new Steering Group should be more than just replacing the G7 with a fixed-number G14, as this would be using old world methods to remake the new.

The Steering Group should evolve to fit changing circumstances, including new emerging powers, while serving as a network for frequent interaction, he said.

"We need a Facebook for multilateral economic diplomacy," Zoellick said.

Warning about the effects of the financial crisis, Zoellick said "The events of September could be a tipping point for many developing countries."

"A drop in exports, as well as capital inflow, will trigger a falloff in investments," he noted. "Deceleration of growth and deteriorating financing conditions, combined with monetary tightening, will trigger business failures and possibly banking emergencies."

"Some countries will slip toward balance of payments crises. As is always the case, the most poor are the most defenseless," he said.

(Xinhua News Agency October 7, 2008)

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