G-7 To Seek Support For Econ Reform Plan At APEC Meet
By JOSEPH REBELLO
Dow Jones Newswires
WASHINGTON -- The Group of Seven leading industrial nations, having
agreed on what analysts say is an unusually detailed prescription for
preventing a recurrence of the global economic crisis, is set to begin
lobbying developing countries to adopt the prescription.
The lobbying campaign will begin later this week, in meetings in Kuala
Lumpur, Malaysia, of economic officials from the 18 industrial and
developing countries that comprise the Asia-Pacific Economic
Cooperation (APEC) forum, according to officials familiar with the G-7
effort. Those meetings begin Nov. 7 and last through Nov. 18.
The G-7 prescription, announced in a communique Friday, involves the
creation of a new International Monetary Fund credit line that will make
make loans to healthy economies threatened by financial contagion. It also
involves a new World Bank emergency credit facility, a vow to pay closer
attention to the activities of hedge funds, and an agreement to study how
exchange-rate systems in emerging-market countries can be made stable.
G-7 experts said the prescription is so sweeping in its scope that its
effectiveness will depend on the degree to which emerging-market
economies embrace it. They said the group decided it was time to act after
months of head-scratching that had made international monetary authorities
seem impotent in the face of a deepening global economic crisis. "The
name of the game at this point is more heavily implementation as opposed
to thinking through the problems," one G-7 official said.
Analysts said the implementation of the new IMF credit line is likely to be
a key topic in G-7 discussions with developing countries, particularly since
Brazil is widely expected to become its first user in the next few weeks.
The G-7 plan will allow countries facing sudden capital flight to obtain
short-term loans from the IMF, provided they're already pursuing "strong
IMF-approved policies." They would have to pay a "surcharge" involving
at least 3 percentage points above market interest rates for those loans.
"The questions are: 1) What criteria will be established for drawing from
the credit line?; 2) Who will set the criteria?; and 3) Who makes the call
that a country is no longer eligible for the loans?" said Robert Hormats,
vice chairman of Goldman Sachs & Co. in New York. "These are
complicated issues that will have to be worked out. Is the G-7 going to
work it out among themselves, or are they also going to get other countries
on board?" |
