The world economic leaders gathered in Washington This week they gave a sigh of collective relief because the economic order centered on the United Donald Trump.
Spring meetings of International Monetary Fund and World Bank They were dominated by commercial conversations, which also gave rise to some Washington statements to de -display their relations with China.
However, After Trump’s attacks on international institutions and the Federal Reserve, the central bankers and the finance ministers raised some more transcendental questions: Can we continue to have the US dollar as a World Safe Refuge and the two lend entities that have supported the international economic system since the end of World War II?
Conversations with dozens of people from all over the world revealed a generalized relief before Trump’s decision to modewhom he had previously described as a “great loser.”
And many also saw a positive side in the call of the US Secretary of the Treasury, Scott Besent, To reformulate the IMF and the World Bank according to Trump’s priorities because it implies that the United States is not willing to retire from the two agencies that helped create at the 1944 Bretton Woods conference.
“This week brought a cautious relief,” said the governor of the Central Bank of Austria, Robert Holzmann. “There was a change of position (in the US administration), but I am worried that it is not the last. I keep my reservations.”
The politicization of the Federal Reserve and, to a lesser extent, the weakening of the IMF and the World Bank are almost impossible concepts for most leaders.
Without a last instance lender, about 25 billion dollars of bonds and loans issued abroad would be in danger.
In the center of the concerns of the political leaders is the lack of a viable alternative to the United States as a world hegemonic financial power, a situation that economists know as the “Kindleberger trap”, in reference to the renowned historian Charles Kindleberger.
Without a doubt, the euro, a reserve currency that occupies a second place, is gaining popularity in the light of the new status of the European Union as a relative island.
However, the economic managers who spoke with Reuters were categorical in which the single European currency is not yet prepared to dethrone the dollar and that, in the best case, could aspire to slightly increase its quota of 20% of world reserves.
Of the 20 countries that share the euro, only Germany has the credit rating and the size that investors demand from a safe shelter.
Some other members are highly indebted and prone to episodes of political and financial agitation (the most recent in France last year), which raises persistent questions about the long -term viability of the block.
And the geographical proximity of the Eurozone to Russia – particularly to the three Baltic countries that were once part of the Soviet Union – projects an even more sinister shadow.
Now that Japan is too small and the Chinese currency, strongly controlled, is in an even worse position, there are no alternatives to the dollar system underpinned by the Federal Reserve and the two institutions of Bretton Woods.
In fact, the IMF and the World Bank could hardly survive whether its largest shareholder, United States, retired, said those consulted.
“The United States is absolutely crucial for multilateral institutions,” Polish Finance Minister Andrzej Domanski told Reuters. “We are glad to remain.”
Even so, few expected it to return to the old status quo and probably thorough issues, such as the general dependence on US companies for a series of key services, from credit cards to satellites.
However, some observers argued that the agitation of the market of recent weeks, which caused a strong fall of US bonds, actions and currency, could have been a revulsive, since it forced the US government to change course.
“When President Trump talked about saying goodbye to Powell, the energetic reaction of the markets ended up being a disciplinary reality that simply reminded the government that, if the line is crossed, it could have very serious consequences,” said Nathan Sheets, CITI global chief economist.
By Francesco Canepa, Jan Strupczewski, Leika Kihara, from Reuters Agency
Source: Ambito
