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To: Bobby Yellin who wrote (15270)	8/4/1998 3:33:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116764

Treasury's Summers Says 'Long Way to Go' to Resolve Asia Economic Crisis Summers Says 'Long Way to Go' to Solve Asia Crisis (Update2) (Rewrites 1st-5th paragraphs and adds that U.S. stocks decline on Asia concerns.) Milwaukee, Aug. 4 (Bloomberg) -- Asia has a ''long way to go'' to solve its economic crisis, U.S. Deputy Treasury Secretary Lawrence Summers said. At the same time, the crisis doesn't threaten to derail the U.S. economic expansion as long as Japan and other countries take needed steps to restore their economies to health, he said. ''We have a long way to go in working through these problems,'' Summers said, answering questions after speaking to the National Governors Association. Still, ''there is no inherent reason -- if we respond well and others respond well -- why it needs to pose a threat to the basic momentum of an American economic expansion,'' he said. ''With a strong response, particularly if the Japanese take what I think are crucial steps for them, I think this can remain very much a contained situation,'' Summers said. U.S. stocks have dropped for three straight days on concerns that corporate earnings wouldn't meet expectations -- in part because the economy is slowing under the weight of Asia's woes. The Dow Jones Industrial Average has lost more than 7 percent of its value since rising to a record on July 17. In Japan's case, the government needs to spend money -- or return it through tax cuts to consumers for them to spend -- to pull out of recession. ''Increasing budget deficits through spending -- if the spending is productive -- or through tax cuts is overwhelmingly likely to be stimulative'' for Japan, Summers said. Some Asian nations, such as Thailand and Korea, appear to be getting their economies back on track, though Indonesia still faces difficulties, he said. ''There is a sense the situation is coming under more control in Korea,'' he said. At the same time, he said, ''largely for political rather than economic reasons, the situation in Indonesia is more serious than it appeared six months ago.'' In the text of his remarks, Summers said the Clinton administration is trying to help restore investor confidence in nations affected by Asia's financial crisis. ''Our goal is clear: to work to restore stability and growth in Asia and Russia and prevent further contagion in other markets,'' he said. IMF Help Critical Restoring stability will come with the assistance of the International Monetary Fund, as well as reform from the governments of the countries involved, he said, stating the administration's long-standing view. ''A strong domestic response is the absolute prerequisite for restoring stability because any amount of financial support that goes into an economy will flow right back out if policies are unsound and governments are not credible,'' Summers said. That response includes: sound monetary and fiscal policies; policies to strengthen the financial system; and structural reforms to open the economy, raise transparency and let market forces operate, he said. Leaders in both China and Japan seem to be taking steps to fix problems in their respective economies, Summers said. In Japan, the new government ''has reaffirmed the importance of fiscal action to stimulate domestic demand and tackling decisively the problems in the financial sector,'' he said. To help that process along, the U.S. should help support the IMF, he said. ''The IMF has been critical to our containment of the Asian financial crisis to date,'' he said. The U.S. House of Representatives delayed consideration of an additional $18 billion in IMF funding requested by the Clinton administration until September. Some Republicans have sought to limit the funding to $3.5 billion and attach conditions on those funds that would require changes in the IMF's lending practices and force it to provide more information on its internal operations. The administration of President Bill Clinton requested $14.5 billion for the IMF to boost its existing loan pool and $3.5 billion more for a new lending fund made up of reserve lines of credit with major industrial nations. The Senate in March approved Clinton's request, with conditions attached the administration said it could support. Even with the delay, the administration expects Congress to contribute $18 billion this year to the IMF, U.S. Treasury Secretary Robert Rubin said last month. The IMF has contributed about $35 billion to international aid packages put together to help South Korea, Indonesia, and Thailand replenish foreign currency reserves which were drained to repay mounting short-term debts.