Gloom, cheer at opening of meeting

Press, 8 September 1982, Page 9

Gloom, cheer at opening of meeting

NZPA Toronto The world’s economy is in its worst shape for 40 years, according to the Canadian Prime Minister (Mr Pierre Trudeau). But the United States Treasury Secretary (Mr Donald Regan) believes that a strong recovery is becoming more likely every day.

The conflicting messages were given to the opening session yesterday of the fourday annual meeting of the International Monetary Fund and World Bank which has been overshadowed by fears generated by huge debt problems in Mexico and other countries. Mr Trudeau said that the world’s economic predicament was worse than at any time since the I.M.F. and World Bank were conceived in 1944 at a meeting in Bretton Woods. New Hampshire. “We must marshal the

spirit of Bretton Woods to work our way through our deenlv troubled times. We must look to a stronger Fund and a stronger World Bank." But Mr Regan told the delegates that President Ronald Reagan's economic policies had paved the way for recovery in the United

States and' the rest of the world.

“The stage has been set for a strong recovery that is becoming more probable and more imminent with each passing day. A lasting world economic recovery, with significant reductions in unemployment, is now within our reach,” he said.

In his address to the opening session, the Funds managing director (Mr Jacques de Larosiere) conceded that the economic picture was grim but urged countries not to resort to expansionary policies that would reignite inflation. He said there “are no quick fixes" and governments should focus on reducing spending and deficits. The World Bank's president (Mr A. W. “Tom" Clausen) appealed for adequate aid from the industrial countries to the poor in Asia and Africa, who he said would be condemned to permanent poverty unless they received help.

"Societies as poor as these are in many cases vulnerable to social tension and civil unrest,” he said, adding that these problems could spill over and affect more prosperous countries. Meanwhile at the conference Western central bankers have suspended

emergency cash aid to Mexico to put pressure on it to agree to a tough new economic programme. Senior monetary officials said that the Bank for International Settlements, which receives its funds from the main central banks, had decided to withhold more payments on a SUSI.BS billion loan to Mexico which has a debt of SUSBO billion. The officials said that the funds, which were supposed to tide Mexico over until more aid arrived, would be held back until there was some progress in negotiations between the I.M.F. and Mexico on a SUS4.S billion Fund rescue. About a third of the emergency aid had already been handed over to Mexico, monetary sources said. The decision 'to hold up payments had been taken at a private meeting to force the Mexican Government to adopt tough new policies to put its economic house in order, they said. The I.M.F. insists on a

severe economic austerity programme to stabilise the Mexican economy before it will go ahead with the loan.

Another central banker closely involved in the Mexican loan negotiations said that talks with the I.M.F. were going far from smoothly.