P.M. may lose his I.M.F. battle

Press, 7 September 1982, Page 6

P.M. may lose his I.M.F. battle

From

G. G. Shand,

“New Zealand-Herald"

Toronto The Prime Minister.- Mr Muldoon, and his Commonwealth allies looked to be on the losing side on the eve of the annual International Monetary Fund and World Bank annual meetings due to start in Toronto early this morning. Mr Muldoon, with the support of most of the Commonwealth, was expected to start his campaign this morning to persuade the international financial community to begin a big reappraisal of the role of the I.M.F. to restore stability to the world monetary system. His chances looked slim, judging by the hard-line, inflexible stance adopted by the world's richest nations in the traditional pre-meeting sessions held over the weekend. The clear implication from

the plethora of statements which have emerged in the last two days is that the world's big “five” — the United States, Japan, West Germany, France and Britain — are in no mood for a change in the I.M.F.'s role. Yesterday, the 10 richest nations totally rejected the fears of Mr Muldoon and most of the developing countries of a possible collapse in the world’s international financial system. Instead, they gave a whole-hearted "thumbs-up" to Reaganomics and Thatcher monetarism by recommending the continuation of present austerity policies which, they said, had “proved themselves.” In a statement, they declared: “A continuation of progress made against inflation should allow a continuation of the recent decline in interest rates, which should lead to the re-establishment of healthier bases for the revival of investment, of

growth and of employment

world wide." This stance, on the eve of the four-day meeting, was immediately interpreted by most observers as effectively killing the demands of Third World and developing countries for a huge injection of funds into the I.M.F. to stimulate a world recovery programme. It came as especially bad news to the dozen or so nations in Latin America, Eastern Europe and Africa which are in serious difficulties trying to service huge international debts at a time of world recession. Mr Muldoon, in London last week for the Commonwealth Finance Ministers' conference, made it clear that he too did not support a big injection of new funds which he felt would only be a make-shift, short-term answer. He pressed strongly for a new Bretton Woods-style international conference of

the 140-odd I.M.F. members, which, he said, could devise a new system of international financial discipline. In spite of opposition from Britain and Canada, both members of the 10 richest nations, Mr Muldoon successfully got support of the majority of the other Commonwealth countries in attendence for his call for a new conference.

He will raise the topic in a key speech to. the I.M.E. this morning, but given the attitude of the “big five” his hopes of success looked remote last evening. He may well have the numbers to give his call credence but has nowhere near the voting, power he needs to muster to ensure that it is adopted. New Zealand, for example, has only 0.58 per cent of voting strength in the 1.M.F., a share similarly enjoyed by most of his Commonwealth supporters.' The United States on the

other hand, has 19.64 per cent followed by. Britain with 6.86 per cent, Germany with 5.08. France 4.51 and Japan 3.92. While these countries and the other big economies of the Western world spent most of the week-end in Closed private meetings hammering out their approach, Mr Muldoon maintained a low profile. Yesterday he visited the Niagara Falls and, with his wife, Thea, and a small New Zealand party, donned raincoats and braved the “Maid of the mist” boatride to the foot of the thunderous Horseshoe, Falls on the Canadian side of the border. Later .-.he. lunched at a vineyard . tasting the local crop', but he also, as is his penchant on such overseas visits, produced a case of Montana Marlborough Riesling to impress on the local experts the quality of New Zealand wine.