Global leaders at the G20 summit in London should urge a radical reform of international financial institutions so as to pave the way for a new international economic order with a common set of rules and codes of conduct, Italian experts said in interviews with Xinhua on Friday.
Pierpaolo Benigno, economics and finance professor at Rome's LUISS University, said he expects "the G20 summit to launch a recapitalization of the International Monetary Fund."
"Reaching financial stability is the first objective in tackling the financial turmoil," Benigno said. "Well-performing countries must help those in greater difficulties by giving larger loans. There should be a global system of compensation among nations to level deficit and debt inequalities."
"Countries with high levels of capital reserves, such as China, could donate larger loans to the International Monetary Fund," he added.
Gloria Bartoli, LUISS professor of International economy and former expert at the World Bank and Bank of Italy, said it's "a unique opportunity to launch a reform of global financial institutions" at the G20 summit.
"There are two major issues at stake," she said. "First, there's the need of a coordinated global increase in loans to the International Monetary Fund. Second, a new system of global and multi-polar governance is to be put in place."
According to Bartoli, the International Monetary Fund needs urgent reform because it is already out of date. "It reflects the power of one single dominating country, the United States. More space needs to be given to emerging countries, especially China," she said.
Bartoli also appreciated "the head of Chinese central bank's plan to displace the American dollar as the world's standard and replace it with a global reserve currency operated from the International Monetary Fund, the so-called Special Drawing Right."
"It's the right solution to increasing global liquidity in favor of straining developing countries," she said.
At London's G20 summit, "Italy and Europe should strike an alliance with China, India and Brazil to change the International Monetary Fund's voting system," Bartoli suggested. "The U.S. has the voting weight, making it the sole country with a one-vote veto and today this is unjustified," she added.
Carlo Secchi, professor of European economic policy at Bocconi University in Milan, said the London summit should focus on promoting "a new global financial system".
"Financial disclosure, compliance, transparency and appropriate codes of behavior are to be enhanced," he said. "A lack of supervision triggered the economic downturn. This is why a new set of rules and values is needed."
He went on to say that the economic downturn resulted from a "degenerative financial conduct," and that it is imperative to restore "sound morals and practices."
"Governments should not give in to protectionism. The measures so far taken around the world have been encouraging and stock markets reacted well," he said. However, Secchi is not so optimistic and believed "the worst may not be over yet."
Talking about the need to reach a coordinated fiscal policy in tackling the financial turmoil, professor Benigno said "it is difficult and inappropriate."
"Fiscal stimuli can only be at local level, not global because each country has a different economic system," he said.
"The Unites States' fiscal measures have been stronger than Europe's, for example. It's a global crisis but it triggers different local problems."
According to Benigno, "the G20 meeting cannot aim at a coordinated fiscal policy. This is the competence of global financial institutions such as the International Monetary Fund, the Basel Committee and the Financial Stability Forum previously created by the G20. Only these bodies are able to create a global system of banking control and supervision."
"The G20 meeting can simply restore confidence in financial institutions using its moral suasion power," he added.
Regarding Italy's role at the G20 summit, Benigno said the country "occupies a marginal position in the global economic downturn."
However, he added, "the Italian government can positively contribute to the summit."
"It has demonstrated wisdom in the measures so far taken and has set a good example by avoiding bail-outs," he said. "The Italian Ministry of Economy has issued treasury bonds to cover toxic assets, while Italy's central bank has introduced a reliable system of guarantees for bank credit swaps."
Professor Secchi also said "Italy holds the G8 presidency and must have an active role in promoting consensus regarding the rules of global governance" at the London summit.