Merkel said governments must take firmer control of markets and used a speech to the World Economic Forum in Davos to again criticise US subsidies to ailing American car firms.
The German chancellor said international leaders must make a commitment to free market forces while ending the excesses and “irresponsible deeds” that caused the crisis. She said Germany’s social market economy could reconcile both aims.
“The state is the guardian of the economic and social order so it has a very clear role. Competition is necessary but it is something that also needs a certain discipline and principles.
“Freedom is a necessary precondition for market forces to operate. But individual freedom needs to be limited if it takes freedom away from others. A completely unfettered market cannot take this structure.”
She said the world needs “clear cut rules quite in contrast to an unfettered capitalism that runs enormous financial risks.”
The principles she outlined “need an integrated financial system with the necessary institutions to take necessary international responsibilities.”
Merkel said there had to be an open world economy. “We must not allow market forces to be completely distorted because every country is fighting for survival.”
The chancellor declared that she was “very wary of seeing subsidies in the United States being injected right now into the automobile industry. This must not be allowed to last too long because they invevitably lead to some distortion and are quite frankly protectionism.”
Governments also had to commit to protecting the environment and efforts to reduce the poverty gap.
“All these principles need to be enshrined in the form of a global economic order charter” which could be agreed by the Group of 20 countries, the major powers and developing nations who are to hold a new summit on the economic crisis in London in April.
The charter “could lead to the establishment of a UN economic council, just as the Security Council was created after World War II”, she said highlighting the importance of the UN body in dealing with the wartime crimes of the German Nazis.
“We must pool all of our energy and cooperate at the international level,” Merkel said.
The chancellor’s spokesman on Friday said Germany will bring together the heads of major international economic institutions next week for a meeting on the state of the global economy.
Merkel will hold a working lunch Thursday in Berlin with the directors of the International Monetary Fund, the World Bank, the International Labour Organisation, the Organisation for Economic Cooperation and Development and the World Trade Organisation, deputy government spokesman Thomas Steg said.
Steg said such meetings were intended “to reinforce cooperation among and with international organisations” and were first launched during the German presidency of the Group of Eight most industrialised nations in 2007.