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Gordon Brown warns of new global economic crisis to rival 2008

Gordon Brown warns of new global economic crisis to rival 2008

By Shaun Connolly, Press Association Political Correspondent

The world is in danger of sleepwalking into a repeat of the near financial meltdown of 2008, Gordon Brown has said.

The former prime minister insisted dangers had increased because the world is now “leaderless”.

Asked about the risks of a repeat of the economic collapse of a decade ago, Mr Brown told the Guardian: “We are in danger of sleepwalking into a future crisis.

“There is going to have to be a severe awakening to the escalation of risks, but we are in a leaderless world.”

Mr Brown, who was prime minister during the onset of the 2008 financial crisis which helped destroy his premiership in the 2010 general election, said the international co-ordination shown then would be impossible now.

He said: “The co-operation that was seen in 2008 would not be possible in a post-2018 crisis both in terms of central banks and governments working together.

“We would have a blame-sharing exercise rather than solving the problem.

“In the next crisis a breakdown of trust in the financial sector would be mirrored by breakdown in trust between governments.

“There wouldn’t be the same willingness to cooperate but rather a tendency to blame each other for what’s gone wrong.

“Countries have retreated into nationalist silos and that has brought us protectionism and populism.

“Countries are at war with each other on trade, climate change and nuclear proliferation.”

Mr Brown said that the trade war US president Donald Trump has launched against China would be a major obstacle to any international co-operation in a future crisis.

He said: “Trump’s protectionism is the biggest barrier to building international cooperation.”

The former PM admitted that Labour should have been tougher on the City in the boom years leading up to the 2008 near meltdown.

He said: “Yes, we did not know what was going on in some of the institutions, some of it illegal, and which was being covered up.”

He added: “The penalties for wrong-doing have not been increased sufficiently.

“The fear that bankers will be imprisoned for bad behaviour is not there. There has not been a strong enough message sent out that government won’t rescue institutions that haven’t put their houses in order.”

Downing Street said that Prime Minister Theresa May disagreed with Mr Brown’s view.

A spokeswoman for the PM told a Westminster briefing: “Since 2008 we have built one of the most robust regulatory systems in the world designed specifically to ensure financial stability and protect taxpayers.

“We have, obviously, reformed regulation to put in place one of the toughest systems in the world and we have made it easier to deal with any issues that emerge on the banking front.

“In recent years we have reformed regulation of the City and put in place an incredibly robust system, one of the most robust in the world, at the same time making sure it’s globally competitive.

“Bank shareholders are now first in line to pay for the losses from any bank failures. They have to hold 10 times more capital than they did before the crisis, meaning that they have larger buffers.

“Certainly, we have taken significant steps to safeguard our economy.”

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