(Previous post was a duplicate of this one)

As if the US will go along with this. The bit about a new veto-proof global reserve system should set off some big alarm signals, but who knows.

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The Group of 20 should be replaced by a new Global Economic Council, an advisory panel of senior international economists has said.

Under the panel’s proposals, the council, which would be a United Nations body, would become the main forum for setting the agenda for worldwide economic and financial policy.

The proposal, made by an 18-member UN commission headed by Joseph Stiglitz, the Nobel-prizewinning economist, will be raised at next week’s expanded G20 summit in London, at which heads of state will debate a global response to the world financial crisis. It is part of a draft 10-point plan put forward by the panel, appointed last October by the 192-member UN General Assembly, to study reform of international financial institutions, including the World Bank and International Monetary Fund. The team includes academics, central bank officials, and former and serving ministers from Japan, western Europe, Africa, Latin America and Asia.

The new UN body, which would be independent of the Security Council in which the main powers hold a veto, would have a membership of 20 to 25, Mr Stiglitz told the FT. The proposal goes to the general assembly this week.

The panel’s plan also proposes a new global reserve system that would provide support to developing countries on a regular basis and would not be subject to veto by industrialised countries that dominate existing international financial institutions, such as the IMF.

The plan calls for developed countries to set aside 1 per cent of their fiscal stimulus plans, in addition to existing foreign aid budgets, to spend in developing countries. “While the decision on stimulus is national, it should be judged on its global impacts,” the panel says in a draft document.

It also calls on advanced economies to abide by pledges to avoid protectionism “and . . .  insure that stimulus packages and recovery programmes do not further distort the economic playing field and further increase global imbalances”.

The draft criticises “misguided policy recommendations” by institutions such as the IMF that have prevented developed countries from adopting the counter-cyclical stimulus policies being pursued by the developed countries.

The draft document says that a global response to the financial crisis “must encompass more than the G7 or G8 or G20, but the representatives of the entire planet, from the G192”.

Copyright The Financial Times Limited 2009