( fsb ) as well as the bank for international settlements ( bis ). a major criticism against the bretton woods agreement of 1944 is that it separated economics and politics in “ water tight ” compartments according to richard gardner in his very interesting book “ sterling dollar diplomacy 9 ”. in this regard, political policy choices can continue to put off adjustment in surplus countries. how any reformed international monetary system can bring about the needed consistency between economic and political considerations will be a major challenge for the global community in the coming years. the global crisis and the fact that it started in the us may have led some to believe that the current ims model of using the dollar as the global key currency has been undermined. moreover, recent sovereign debt problems in europe raised doubts about the euro and whether a single currency, with limited political integration, and little fiscal coordination among member countries, could be sustainable. in this regard, i suggest that most of the concerns are not totally justified. the dollar is backed by trust in the us political and economic system, the liquidity and depth of the us financial markets and the outstanding infrastructure for payments ’ settlement. moreover, and although the euro has been around for only ten years, it is today associated with price stability. in this regard, i think major credit should go to the european central bank ( ecb ) and to president trichet also for his consistent stand on the independence and integrity of the ecb. by definition, only currencies that can be freely convertible for trade or investment purposes have the potential to achieve the status of an international currency. furthermore, the international use of currencies is a market - driven process which is determined by independent decisions of private agents and public policy. the criteria for central banks ’ decisions on their foreign currency portfolios often differs from the considerations of private savings which may be more related to standard portfolio choice criteria. when the present international monetary system in its original form was agreed upon in 1944, it was expected that the dollar would be the main reserve currency. over sixty years on, the dollar is still the main reserve currency. any shift by central banks from holding dollar reserve assets risks large accounting loses. structural reforms, in particular, in the area of medical care and entitlements as well as addressing what is often described as a savings glut or investment drought, are essential to restore balance to the global economy. major reserve currency governments are responding to the calls for fiscal balance, higher savings, and more balanced investment

interest and undervalue international interests but also the market mechanism seems to produce a similar outcome. an interesting argument in support of this view was presented in the per jacobson lecture last june in basle 6 and i quote “... there is a nationalist bias in the pro - market revolution... ” unquote. given the dominance of globalization and the interdependence of financial markets, it may seem paradoxical that there is still that much difficulty in reconciling national and international interests. to sum up on this point : i think the bretton woods institutions and indeed the united nations system were designed to reconcile national interest with global interests and to ensure the mutual consistency of national policies 7. the fixed but adjustable peg and later on the floating or managed exchange rates regime were supposed to take care of imbalances in the current account. the prevailing hybrid system of exchange rates could not clear the current account and imbalances continue to persist. the good news is that imf surveillance proved to be invaluable in the case of deficit developing countries. since the late 1980s, we have introduced several key structural reforms in jordan based on imf surveillance and imf consultations. more recently, the fsap reviews helped us introduce several key reforms in the financial sector. other developing countries may have gone through the same exercise. in this regard, the imf can play an important role in the ongoing regulatory and financial reform efforts on both sides of the atlantic. furthermore, the call for more legitimacy in representation or quotas may enhance the multilateral role of the imf and meet the concerns regarding imf governance. more importantly, i suggest that enabling the imf to provide international liquidity when needed with schemes that establish a “ global financial safety net ” and expanding its mandate in the light of the recent global crisis to include macrofinancial surveillance and spillover analysis should be seriously considered. in general, i would suggest that strengthening the imf with some enforcement mechanism, such as keynes original idea of a global clearing bank, would restore to the international monetary system some needed ownership and credibility. i believe it was the late charles kindleberger 8 who said that the international financial system will not work unless somebody should take responsibility for it. finally on this point, it is also essential for the imf to saccomanni, 2010. tommaso, 2010. carney, 2009. landau, 2010. enhance its collaboration with the financial stability board