World has reserves to beat crisis - Brown

The world has more than enough reserves to help restore financial stability, British Prime Minister Gordon Brown said yesterday, but a way needs to be found of unlocking the funds.

Speaking on the second leg of a three-continent tour to drum up support for the G20 summit in London next week, Mr Brown said countries with high reserves, such as China, needed an insurance policy to protect them while encouraging them to lend.

"We've got seven trillion (dollars) of reserves around the world. Probably for the sake of financial stability you need maybe only half of these reserves. The rest can actually be far more effective in being used to get growth into your economies," Mr Brown told an audience at the Wall Street Journal in New York.

"If we could find an insurance policy which guaranteed for these countries action in the event of their currency being in difficulty, that in my view would satisfy half the problem that is being raised by China and Russia."

Mr Brown did not offer more details on any such programme, but said it could be managed by the International Monetary Fund.

China said earlier this month the world should consider developing the IMF's special drawing rights (SDR) as a super-sovereign reserve currency. Responding to this, US Treasury Secretary Timothy Geithner said yesterday he was "quite open" to the idea of increasing the use of SDRs.

Mr Brown's visit to the United States is the second leg of a five-day blitz ahead of the G20 summit on April 2 which has already taken in Europe and will move on to Latin America.

Mr Brown said there was a need to create a new "precautionary facility" that crisis-hit countries could go to that did not carry the stigma of asking for help from the IMF.

Such a facility could be within the IMF, or it could be funded by countries interested in doing so, or it could be funded by sovereign wealth funds or with SDRs, he said.

"There are a number of ways we are looking at about how this can be done," he said.

Speaking later at New York University, Mr Brown warned of the danger of a retreat into protectionism, and promised action at the G20 to help tackle a shortage of trade credit that is restricting world trade.

"We want to give people the opportunity to resume trade where there are no trade credits and facilities available ... So I think we'll agree on a very substantial package of helping countries to trade," he said.

Keen to show that consensus is being reached ahead of the summit, which Mr Brown hopes will produce a framework for global cooperation in responding to the crisis, the prime minister also played down suggestions of rifts with his own central bank governor and with other leading economies.