Efforts to establish a new global financial system is no longer limited to those by emerging economies, as it has been in the past. Many Western countries, led by France, have joined in, which indicates a significant shift and one that will radically reshape global financial and monetary transactions.
At a recent Franco-Chinese summit, following a meeting with the Chinese Prime Minister, French President Emmanuel Macron said: “We have developed a roadmap to work on a serious global financial pact.” And adding quite succinctly, “It is necessary to work on reforming international financial institutions.”
It is not only about the need to create a new financial system, but also about setting a roadmap between China, the world’s second-largest economy, and France, the second largest economy in the eurozone. The French President emphasised this approach when he simultaneously received Saudi Crown Prince Mohammed bin Salman, stressing that “Saudi Arabia plays an important role in paving the way for a global financial pact.”
This means that most countries are moving to change the existing financial system, especially because a unipolar monetary system has become a threat to their economies. Plus, there is the weak independence of other currencies, including major ones, such as the euro.
As evidence of this concern, the European Central Bank issued a warning in mid-June regarding the potential impact on the value of the euro if frozen Russian assets are utilised. The warning comes after some hard-line voices in the EU called for the use of these assets to finance reconstruction in Ukraine, resulting in an angry reaction from Russia.
Trying to erode BRICS’ prospects
The pursuit of a new global system entails significant challenges given the complex nature of alliances, which are subject to various pressures and temptations. This happened at a time when Britain has voiced the need for Saudi Arabia to join the G7 to keep it away from the BRICS group.
The move is aimed at preventing the inclusion of new members such as the UAE and Egypt to BRICS, as highlighted by the ‘Foreign Policy’ magazine, which said: “The recent endeavours to urge new countries to join the G7 threaten to turn the BRICS into a bloc dominated by China, which wants to transform it into an alliance under its leadership to confront the United States and the West.”
In addition to the conflict of interests between the various parties and the disparity of alliances, such as the France-China cooperation, there is also the media-entailed aspect, which works to sow doubts, intimidate and spark discord between the various parties.
Equal weightage for all economies
The new financial system, which is proceeding with steady steps, does not allow the hegemony of any single party, including within the scope of the BRICS group. The Sino-French cooperation seeks to establish legislative mechanisms that will prevent any such dominance, but rather allow everyone to contribute according to their economic and financial potential.
Since these capabilities complementary in many aspects, the possibility of hegemony of any party is unlikely due to the great weight exerted by the rest. This means that any attempt to dominate will harm the party concerned and lead to counter results, especially since the countries involved in the new approach - China, France, India, Russia, Brazil, the UAE and Saudi Arabia - all enjoy strong economies and are able to retain the independence of their financial decisions and economic policies.
Considering the interests of the global economy as a whole, it is quite apparent a new financial system is in the interest of all and lead to greater stability and growth.
It will also help overcome various crises and address serious problems such as unemployment, hunger, and inequality all of which were emphasised by President Macron.