Emerging economies and European Union nations should work together to push for a global reserve currency during the forthcoming G20 summit, economists said.
If implemented, such a plan could lead to an overhaul of the global economic order, they said.
Leaders of the world's 20 major economies are gathering in London later this week to discuss measures needed to pull the global economy out of the woods.
Over the past weeks, emerging economies have been advocating replacing the US dollar with a new global reserve currency, due to concerns over the growing instability of the dollar.
"Europe should join in the efforts to create a more balanced and fair economic system," Chi Fuling, president of the China (Hainan) Reform and Development Research Institute, told China Daily yesterday on the sidelines of the International Forum on China Reform. "Excessive dependence on the US dollar makes all of us very vulnerable."
US dollar and treasury bonds account for about 60 percent of the currency reserves of global central banks, which would suffer losses from a depreciation of the dollar and lower returns of the treasury bonds.
Yet the US government's recent stimulus package, which would flood the world with dollars, is likely to further weaken the dollar.
Joseph Stiglitz, a Nobel laureate for economics, said endemic inequality exemplifies the current global financial order, as developing countries have been lending the United States trillions of dollars "at almost zero interest rates when they themselves desperately need that money".
"If Europe and emerging economies cooperate on the issue, it will at least put pressure on the US to be more prudent with its monetary policy," said Sun Lijian, professor of economics, Fudan University, Shanghai. "And we can put the issue on the agenda, rather than leaving it up in the air."
Stiglitz, who heads a United Nations expert panel analyzing the financial crisis and recommending reforms, said in an 18-page report that a new global financial system, with SDR as a global currency, "could contribute to global stability, economic strength and global equity". It also said such an SDR system would be "feasible, non-inflationary and could be easily implemented".
(China Daily March 31, 2009)