FOCUS-G7 states play down Brazil risks, stress reform
Reuters, Thursday, January 14, 1999 at 18:20
(Updates with Tietmeyer comments in paragraphs 3, 7, last para)
By Myra MacDonald
PARIS, Jan 14 (Reuters) - European governments on Thursday
joined the United States in backing Brazil's economic programme,
saying reforms underway rather than any new Group of Seven
initiative were what was needed to deal with the crisis.
Ministers from the G7 rich nations discussed the situation
in Brazil by telephone on Wednesday along with International
Monetary Fund head Michel Camdessus, and top financial officials
weighed in on Thursday to try to play down the risks.
"I think the internal situation is better than some
believe," Bundesbank head Hans Tietmeyer told a banking forum.
French Finance Minister Dominique Strauss-Kahn said that
economic problems which led to the effective devaluation of the
Brazilian real on Wednesday were not comparable to the crises
which swept through Asia and Russia last year.
"The situation in Brazil is not good. However, I do not
think that we are facing something similar to that which we saw
either in Asia or in Russia last August," he told a new year's
press reception.
"The reform of the Brazilian economy is underway," he said.
He added that the entire international community agreed that
this must be continued.
His comments were echoed Tietmeyer, who said it was
important that trust be restored in Brazil's own programmes.
The International Monetary Fund last year offered Brazil a
$41.5 billion rescue deal to support its economic reforms and
prevent an economic crisis which could drag down the whole of
Latin America and then spill over into the United States.
Italian Treasury Minister Carlo Azeglio Ciampi told Rome's
La Repubblica newspaper that it was too early to talk of a new
crisis such as that which hit Mexico in 1994.
He said that although the latest turmoil in Brazil added to
his long-standing fears of global deflation, there was nothing
to be done right now in terms of a new rescue.
"With Camdessus and the others, we all said frankly that at
this moment there is nothing we can or should do. The IMF
approved a $41.5 billion loan in October and it would be absurd
to think of another intervention of a similar nature.
"We did not talk about it (during the G7 teleconference) and
nobody raised it -- not even the Americans who would suffer the
worst effects if the Brazilian difficulties get worse," he said.
Brazil's situation is expected to be discussed by G7 deputy
finance ministers at a meeting in Frankfurt on Saturday, while
it also likely to overshadow talks between European and Asian
finance ministers there on Friday and Saturday.
In Bonn, a German finance ministry spokesman said that the
G7 did not plan at the moment to make a statement on Brazil.
Germany currently holds the rotating presidency of the G7,
which also includes the United States, Canada, Japan, France,
Germany, Italy and Britain.
U.S. Treasury Secretary Robert Rubin said on Wednesday
Brazil needed to carry on with "a strong, credible" programme.
Earlier in Asia, officials from Japan, South Korea, Thailand
and Malaysia said they doubted Brazil's effective devaluation
would cause another emerging market rout.
"Brazil's situation has been known to all (of us) in recent
months. I believe the IMF and U.S. authorities, a lot of people,
have been helping out. So I think the contagion will not be too
great," said Hong Kong Financial Secretary Donald Tsang.
Several European ministers stressed however that the Brazil
problems -- and subsequent severe market reaction -- highlighted
the need for a reform of the international financial system.
"These have been troubled times for the global economy and
for some individual emerging market countries as we saw again
yesterday in Brazil," British Prime Minister Tony Blair said.
He called for greater commitment to world financial reforms,
based on transparency, codes of conduct and cooperation.
Tietmeyer, who has been charged with preparing a report on
reforming the financial system, also said that closer
cooperation among authorities was needed.
paris.newsroom@reuters.com))
Copyright 1999, Reuters News Service
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