Leading nations move to stabilise dollar

Press, 23 February 1987, Page 10

Leading nations move to stabilise dollar

NZPA-Reuter Paris The leading industrial nations have agreed in intensive talks in Paris that they do not want to see any further sharp fall of the United States dollar and will issue a statement today aimed at restoring stability to currency markets, Japanese officials said. But while an outline accord may prove politically acceptable to the delegations, it is far from certain to satisfy the foreign exchange markets. The Group of Seven leading industrial economies, including Italy and Canada, will meet today after preliminary talks yesterday among Finance Ministers and central bankers from the Group of Five — the United States, West Germany, Japan, France and Britain.

The Japanese officials said West Germany and Japan had given their broad agreement to some expansion of their domestic -economies, while the United States undertook to continue tackling its huge budget deficit. But one European monetary source said

there had been a lack of precision, and the Japanese sources said that while participants wanted more stable exchange rates, the question of defining permissible trading ranges was not discussed. The talks are given added urgency by Brazil’s announcement that it will suspend interest payments on its $126 billion foreign commercial bank debt, while Argentina has also warned that it may take similar action.

The heavy debts owed to United States banks in Latin America mean the dollar could well come under, severe new pressure, whatever the outcome of the week-end’s meetings. The Italian Treasury Minister, Giovanni Goria, said he thought prospects for an agreement today were good. He added that he expected Italy’s views to be taken seriously and did not intend simply to rubber-stamp an accord by the Group of Five (G--5).

“If we have the impression that our presence here is superfluous, we will take note that the undertaking of the seven Heads of Government has

not been respected,” he said, adding: “I prefer to think this is not the case.” At the seven-nation economic summit in Tokyo last May, the Heads of Government asked the G-5 Finance Ministers “to include Canada and Italy in their meetings whenever the management or improvement of the international monetary system and related economic policy measures are to be discussed.”

The purpose of any statement issued today will be to reassure the markets that the main economic powers are determined to see more stable exchange rates.

Bankers in Europe, America and the Far East had expressed widespread doubts before the talks that this would be achieved. “I’m not at all sure that the fundamentals for a durable accord have been established ... my fear is that an agreement, if there is one, might disappoint the markets,” commented Jean Cheval, chief economic analyst at the French State bank, Banque Indosuez.