Finance Leaders Pledge Cooperation
By MARTIN CRUTSINGER
.c The Associated Press
WASHINGTON (April 15) - The world's leading financial officials, hoping to calm investors jolted by a record plunge in U.S. stock prices, on Saturday pledged cooperation to promote global prosperity.
The finance ministers and central bank presidents of the world's seven wealthiest countries also promised to keep pushing ahead with reforms of the International Monetary Fund and World Bank.
But the proposals in their joint communique were unlikely to placate throngs of demonstrators on the streets who see both institutions as the embodiment of all that is wrong with global capitalism.
The 10-page statement was issued at the end of six hours of discussions led by Treasury Secretary Lawrence Summers and Federal Reserve Chairman Alan Greenspan with their counterparts from Japan, Germany, France, Britain, Italy and Canada.
The group's statement did not specifically mention the huge plunge in U.S. stock prices this past week, but they stressed an upbeat view of growth prospects for the global economy which they said 'continue to brighten.'
The group did encourage the United States to make greater efforts to boost national savings while at the same time noting that growth 'remains very strong, unemployment low and inflation well contained.'
Summers and President Clinton made similar points Saturday in saying they believed the fundamentals of the U.S. economy remained strong even after a week in which nearly $2 trillion of wealth evaporated on Wall Street.
The Group of Seven statement urged Japan to keep interest rates as low as necessary to make sure the world's second largest economy is able to mount a sustained economic recovery following its worst recessionary period since the end of World War II.
Clinton, who was spending the weekend in California away from the demonstrations, also expressed confidence in the strength of the U.S. economy, saying that financial markets 'go up and they'll go down but I think long-term trends are positive.'
The finance discussions were being held under extraordinarily tight security as local police and federal authorities closed dozens of city streets to keep demonstrators blocks away from the Group of Seven finance meetings and the headquarters of the IMF and World Bank.
The protesters, operating under the umbrella group Mobilization for Global Justice, have vowed to disrupt the opening sessions of the IMF and World Bank on Sunday in a replay of their victory last December when mass protests in Seattle resulted in the cancellation of the opening session of the World Trade Organization.
Washington police, trying to prevent that from happening, staged an early morning raid on the old warehouse the demonstrators had been using as their headquarters, closing it down for alleged fire violations. Two arrests were made.
Several other arrests were made shortly before nightfall as demonstrators massed near the IMF and World Bank headquarters.
The Group of Seven statement voiced support for the work done by the 182-nation IMF and the World Bank while saying that both institutions needed to continue with reform efforts. For the IMF, the rich countries stressed the need for the organization to be 'transparent to the public and accountable to its members.'
The statement outlined in two accompanying documents some principles that should govern reform of the lending institutions and efforts to make sure the private sector carries its share of the burden in financial crisis situations.
However, the statements contained only broad guidelines, leaving details to be worked out later. Sharp disagreements still exact between the United States and its allies over the best way to achieve an overhaul of the IMF and World Bank and how to involve the private sector in future crises.
Summers and Greenspan held a series of discussions with finance officials from several countries in Summers' office before the start of the afternoon G-7 talks, which were held at the Blair House, the government's official guest house across the street from the White House.
Japanese Finance Minister Kiichi Miyazawa told reporters that Summers told the Japanese delegation that the plunge in American stock prices had not altered the strong fundamentals of the U.S. economy, which is currently enjoying the lowest unemployment rates in three decades and is in the midst of the longest economic expansion in the country's history.
Both the Dow Jones industrial average and the technology-heavy Nasdaq composite index suffered record point losses on Friday, capping off a dismal week.
The Nasdaq is now down 34 percent from its all-time high reached on March 10, and the Dow Jones industrial average is 10 percent below its peak reached in January.
The big sell-offs on Friday were triggered by a worse-than-expected report on inflation which raised fears that the Federal Reserve, which has already boosted interest rates five times in an effort to head off price pressures, may be forced to act much more aggressively, raising the danger of pushing the country into a recession.
AP-NY-04-15-00 1842EDT |
