Big, advanced countries in Europe play an important role in policy coordination. These countries are the biggest beneficiaries of the currency union and they have an obligation to take the lead in seeking concrete steps for drastically increasing the European Financial Stability Facility. Obviously, they will have much more to lose if the eurozone disintegrates than putting more money into rescues. Creating the political conditions and acting decisively to maintain the monetary union will not only benefit themselves, but also the future of the European Union and the health of the world economy.

Global collaboration requires strong leadership on reforms. Leaders in Europe now draw on lessons from the sovereign debt crisis, acknowledging that they need to make dramatic changes in how the eurozone will operate in the future. There must be a fiscal union and some other form of transfer mechanism, joint bank supervision and sovereign debt default procedures if the single currency is to survive.

Overcoming a number of theoretical and practical problems, the ECB needs to expand its role from the narrower mission of controlling inflation to, during the worst of a crisis, playing the role of a last-resort lender to eurozone governments and banks. Without strong backing from the central bank, the crisis could further deteriorate.

International bodies, such as the IMF, the Financial Stability Board and the Bank for International Settlements, should work together, taking a more coordinated, creative approach to finding solutions to the crisis, reinforcing a leading role in cooperative policymaking.

There will be opportunities in the coming months for international bodies to take a more active attitude in reaching consensus. Eurozone finance ministers could meet again, and G20 finance ministers will meet later this month. There is a G20 summit in early November and the EU summit in December. The world is looking forward to seeing encouraging results.

For the emerging market economies, the global financial crisis will continue to have negative impacts on their growth momentum and financial stability if the current global problems are not resolved. They will face a different, complex dilemma in policy choices.

In recent weeks, India raised interest rates, Brazil and Turkey cut rates, while China and other Asian countries kept their rates unchanged. Although the emerging economies should not take a one-size-fit-all approach due to their different domestic situations, no individual country can be decoupled from the integrations, so international conditions must still be taken into account when making decisions. Therefore, emerging economies must actively join in the global policy cooperation with their counterparts in the developed world.

The problems are well known, and the solutions are on the table.

There has never been a more urgent need to strengthen global cooperation, and the world looks forward to seeing a new cohesiveness in policymaking, because we are rapidly running out of time.

(China Daily 10/15/2011 page5)