A financial new world order?

When President Bush hosts a world financial summit in the coming weeks, one of the least multilateral American presidents in decades will set in motion what could result in a full reordering of the global financial system.

The series of summits that Mr. Bush announced over the weekend at Camp David with European leaders at his side suggests a broad understanding among them: that the current crisis requires the kind of global regulatory reforms that have eluded major powers in the past.

Europeans especially are speaking of a "Bretton Woods II" that could do for financial markets what the 1944 summit at a resort in New Hampshire did for monetary policy.

But the call for a summit also underscores the degree to which a once go-it-alone presidency has shifted to embrace not only the necessity of international cooperation, but also a role of global leadership.

"Talk of a Bretton Woods II has been around to different degrees for 30 years. But the fact it is getting started with an outgoing administration and especially one that was at the center of a significant crisis between America and Europe, between America and the rest of the world, suggests the recognition that there is urgency in the air," says Simon Serfaty, an expert in US-Europe relations at the Center for Strategic and International Studies (CSIS) in Washington. "It also adds legitimacy to the coming process."

That process, which is expected to stretch into next year and a new American administration, will get under way with a summit that Bush will host sometime after Nov. 4, the date of US elections, according to a statement issued Saturday by Bush, French President Nicolas Sarkozy, and European Union Commission President José Manuel Barroso.

The initial summit is expected to be a kind of expanded Group of Eight meeting, assembling the leaders of the most industrialized nations and those of major developing economies like China, India, Brazil, and South Korea. It would aim to assess the current global crisis and to come up with a set of principles of reform.

Actual agreements on reforms could come at subsequent summits, but the initial meeting would allow Bush to place his stamp on the process before leaving office, while also facilitating a continuity of American leadership.

Saturday's meeting offered a picture of transatlantic unity, but that hardly means the road ahead will be discord-free. Bush says future reforms and new international regulations must improve but not fetter the free market, while European leaders hint at much more robust state intervention with tighter regulations.

Bush recognized the need for "regulatory institutional changes" but added, "It is essential that we preserve the foundations of democratic capitalism – commitment to free markets, free enterprise, and free trade."

In response, President Sarkozy said, "The president of the United States is right in saying that protectionism and closing one's borders is a catastrophe.... But we cannot continue along the same lines," he added, "because the same problems will trigger the same disasters."

Mr. Barroso was more succinct: "We need a new global financial order."

Those words could send shivers through a White House that is suspicious of the current chorus of world leaders – European, Russian, and others less friendly to the US – who are hailing the current economic crisis as a moment to usher in a multipolar world. Bush indicated he seeks to maintain some degree of American stewardship over the financial reform effort when he politely declined the offer of United Nations Secretary-General Ban Ki Moon to host the expanded G-8 summit at the UN in New York.

Among the issues the White House has indicated it would endorse for a reform agenda are rules for the international flow of investment funds, improved oversight of increasingly global financial institutions, and means of boosting the transparency of international financial transactions and markets.

But European leaders have called for what sound like much deeper reforms. British Prime Minister Gordon Brown, for example, has proposed a reorganization of the International Monetary Fund – a Bretton Woods institution.

Behind the European proposals is a sense that the financial crisis and America's darkening economic prospects make this an opportunity for the European Union to play a bigger international role. Last week at the close of a two-day EU summit on the financial crisis, Sarkozy predicted that an international summit would take place before the end of the year because "Europe wants it, Europe demands it. Europe will get it."

More than a show of unity with a declaration for a series of summits will be needed if the world is truly to come together to address the crisis, some observers note. "Unity of purpose is not found in a meeting or series of meetings. It's found in purpose," says Danielle Pletka, vice president for foreign-policy studies at the American Enterprise Institute in Washington. "Whether that's something the major players in this crisis can come together on remains to be seen."

But Mr. Serfaty points out that the Europeans chose to engage the Bush administration, when just a few years ago the deep divisions over the Iraq war were disrupting such cooperation.

"Rather than seeing any kind of disconnect," he says, "I think we should emphasize the fact the Europeans are doing what [the Americans] want them to do, in that they are coming together and taking a proactive approach to this crisis."