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For a new monetary system to replace the second Bretton Woods agreement from 1971 called the World Bank Group president Robert Zoellick in an article for the Financial Times, published on the eve of the summit of the twenty leading industrialised countries and emerging markets in Seoul. The main problem in the global economy today is the sharpening of trade imbalances - countries that borrow a lot because they have large budget deficits (meaning they spend more than they earn) have serious problems, for which they blame the surplus countries that overflow markets with produce.

The conflict of which euinside has already written, is so serious that it seems harder and harder a reasonable solution to be found which, on the one hand, to recover economic growth in the deficit countries and, on the other - to create conditions for a sustainable economic growth of the entire global economy. The problem is that usually politicians in independent states prefer to undertake measures for the former, without thinking much about the latter.

This is why Robert Zoellick proposes five measures which, he hopes, will help solve the problem in the long run.

What is Bretton Woods

Yet in the peak of World War II the leaders of the 44 allied nations agreed for the creation of a monetary system that would settle trade and financial relations among the leading industrialised countries. The basis of the agreement is each country's commitment that ratified Bretton Woods to apprehend such a monetary policy that would maintain the exchange rate of its currency in the framework of a fixed rate - plus or minus 1 per cent. The value of the currency is to be supported by gold (the so called golden standard).

In 1971 the United States unilaterally removed the golden standard and imposed its own national currency (the dollar) as the only reserve currency. With the aim to keep confidence in the dollar, the US bound its value to gold at the price of $35 per ounce of gold. At this value foreign governments and central banks could exchange dollars for gold.

Mr Zoellick proposes gold to be employed as an international reference point of market expectations about inflation, deflation and future currency values. According to him, the development of a new monetary system to replace Bretton Woods II will take time but it is necessary work to start now. His idea is the G20 to come up with a plan for the development of a monetary system that would reflect the new economic realities. Such a new system would probably need to involve the dollar, the euro, the yen, the pound and a renminbi.

This idea is responding to some extent to the recent calls of Russia and several other BRIC-countries the dollar to seize being the only reserve currency. According to Robert Zoellick, such a move would lead to internationalisation and then an open capital account.

What else does the World Bank Group president propose

One of the main things which the G20 countries have to undertake is to agree on parallel programmes for structural reforms which not just to rebalance demand but to boost growth. An important element of these reform programmes should be increasing productivity and competitiveness. In the same time, Robert Zoellick notes, the US has to revive the free trade agreements and to avoid protectionism, as there are such indications.

The US and China should agree on specific, mutually binding steps to boost growth and then agree on an appreciation of the renminbi (the Chinese yuan). In exchange the US could commit to refrain from responsive measures and even better if it starts negotiations on a new agreement to open markets.

The big economies, starting with the G7 countries, on their behalf, the World Bank president recommends, should agree to forego currency intervention, except in rare circumstances agreed to by others. The emerging markets should start relying more on flexible exchange rates and independent monetary policy.

In order to mitigate economic imbalances, Robert Zoellick advises the G20 to support economic growth by focusing on assisting developing nations. Special attention should be paid to infrastructure, agriculture and the development of healthy and skilled labour force. It is where the World Bank could offer several tools, Mr Zoellick reminds.

In fact the key question Mr Zoellick raises is whether international economic cooperation is possible and, if yes, to what extent? In conclusion he again asks: "Drive or drift? How the G20 decides could determine whether multilateral co-operation can achieve a strong economic recovery". The latter we could interpret as a delicate admission that unless measures are taken, trade wars are inevitable.

Explosion of a super nova

Germany is lately showing signs of strengthening its influence abroad. After it in fact took over the European Union from the inside, now the biggest European economy is looking for manifestation outside, for which, as it becomes clear from the interview of the German chancellor Angela Merkel for the Financial Times, Berlin is preparing very seriously.

The key priority Angela Merkel will defend in Seoul is the fight against protectionism and liberation of international trade. With regard to global imbalances and the huge trade surpluses which her country and China have against US's enormous deficit, Ms Merkel is openly against Washington's proposal the G20 to define quantitative targets for restoration of balance. "Exchange rates should reflect the real economic strength of a country", she underlined in her interview for the newspaper.

And another very important thing which the German chancellor is repeating not since yesterday: "One cause of the crisis was that we did not have sustainable growth. In many countries growth was built on debt and [speculative] bubbles. In contrast, I now see the world in some regions returning to a sensible growth path. The greatest danger that threatens us is protectionism, and we are still not taking enough steps to ensure genuinely free trade”.

The German chancellor has criticised many times the countries which instead of increasing productivity and competitiveness rely on bubbles to boost their economies. This is why she often rejected accusations that Germany harmed indebted countries with its excessive export. In order to suppress these accusations, especially within the euro area, she underlined that one should judge the European Union as a single internal market and not on a country-to-country basis.

The biggest issue

It is all evident that this G20 summit will be far more different than any other so far. The reason is that if in the last two years the main agenda of the summits of the twenty was focused on global economic recovery and the measures against the financial crisis, now the knife has reached the bone of global influence and economic weight, which always goes hand in hand with political weight. This is why the exit from Seoul will be very indicative for what will the new world order be from now on.

And in fact the first move was made with the creation of the G20 as the global format for solving global issues. This created opportunity emerging markets and fast developing economies to have a vote equal to those who until recently managed world affairs from the G7. Now the ball is in national governments' playground. Those who have good internal and fiscal policy will have real chances for a leading place in the world. Those who have troubles will have to cede their place.