##ntial approach ”, whereby the objectives of fighting inflation and preserving stability in financial systems could be jointly pursued. if the policy indications formulated in the context of imf multilateral surveillance are not followed, the imf should make its own assessment known to the public opinion. it is possible that this may create a certain volatility in financial markets, but it will also strengthen the market perception of a two - way risk, thus contributing to brake unidirectional unsustainable market trends that inevitably lead to credit booms ( and busts ), bubbles, and misalignments. in the end, i think that the gravity of the present crisis requires a strong determination to correct the flaws and the inadequacies of the present market - led international monetary and financial system. in embarking in this difficult effort, the international community should follow the good suggestions that barry eichengreen and richard baldwin outline in the introduction to the book i have already quoted : “ strengthen existing institutions ; start thinking outside the box ; do no harm ”. 9 see buiter w. ( 2008 ), “ some suggestions for the g20 on november 15th ” in eichengreen b. and r. baldwin ( eds ), op. cit., pp. 17 - 20. see eichengreen b. and r. baldwin ( eds ), op. cit. pp. 1 - 2.

international monetary and financial system in order to make it less crisis - prone than the present one and more resilient to shocks. on this more systemic issue, a lively debate has developed involving politicians, academic economists and financial analysts. a recurrent theme in the debate is the call for a “ new bretton woods ” and the recent meeting of the heads of state and government of the g20 here in washington last november was seen by many observers as the starting point of a process that could lead to a fundamental reform of the world ’ s monetary and financial system. 7 if by a “ new bretton woods ” one means a system built upon the foundations of the “ old ” one, it may be appropriate to recall how this was shaped. in essence, the bretton woods system was based on three main pillars : ( i ) a stability - oriented anchor for macroeconomic policies, operating through the par - value regime for member currencies in terms of gold and the us dollar ; ( ii ) an obligation to maintain freedom from restrictions for trade and other current international transactions ; ( iii ) the possibility of introducing restrictions on capital movements for restoring equilibrium in the balance of payments. obviously, in any reform project, these pillars would have to be adapted to the new reality of financial globalization. leaving aside for a moment the “ anchor ” question of the first pillar, it must be noted that in the g20 summit declaration of november 15, 2008 one can find encouraging language on the issues covered by the two other pillars. as regards free trade, paragraph 13 of the g20 declaration has strong words on the “ importance of rejecting protectionism ” and a firm commitment both to “ refrain from raising new barriers to investment or to trade in goods and services ” and to strive for “ a successful conclusion of the wto ’ s doha development agenda with an ambitious and balanced see, for example, eichengreen b. and r. baldwin ( eds ) ( 2008 ), “ what g20 leaders must do to stabilise our economy and fix the financial system ”, london : centre for economic policy research, a voxeu. org publication circulated on the web on the eve of the g20 meeting. outcome ”. this is a rather non ritual language and it sounds pleasantly out of tune with the widespread feeling that protectionism is on the rise again as a result of the crisis. as regards financial regulation, paragraph 9 of the g20 declaration broadly outlines an approach that rules out any form of old