Tough talk tames dollar

Press, 26 September 1989, Page 8

Tough talk tames dollar

NZPA-Reuter Washington The West’s top economic policymakers appear to have tamed the troublesome United States dollar, at least temporarily, but face mounting scepticism over their plans to tackle the Third World debt crisis. Finance ministers of the seven leading industrial nations, gathered for the International Monetary Fund (1.M.F.) and World Bank annual meeting, had the satisfaction of seeing the United States dollar fall sharply in Far Eastern currency markets yesterday. After an eight-hour meeting on Saturday, the seven warned that the dollar was too high. Traders sold it heavily as soon as markets opened after the week-end break.

Although it was early days, it appeared that the seven — the United States, Japan, West Ger-

many, Britain, France, Canada and Italy — had restored some measure of credibility to their policy-making after' months during which the dollar defied their attempts to push it lower.

The dollar posed a danger to the world economy by threatening to distort the pattern of global trade, but the seven’s debt strategy, pioneered by United States. Treasury Secretary, Nicholas Brady, faced growing scepticism from developing countries and lender banks alike.

On Sunday, Mr Brady appealed at a meeting of the I.M.F.’s policymaking interim committee for a new spirit of realism over his plan, which for the first time recognises that a portion of some bank loans would never be repaid. Mr Brady said his plan was sound but warned: “Excessive expecta-

tions can only promote delays, increase the risk of a breakdown in negotiations and ultimately raise the economic costs both to the banks and debtor countries.”

The plan has already been implemented for Mexico and the Philippines but has run into heavy criticism from United States banks claiming it has made debtor nations even less willing to repay what they owe.

The chairman of one of West Germany’s biggest banks went further on Sunday and called for the scrapping of the plan. Commerzbank’s chief executive, Walter Seipp, told reporters he thought policymakers should find a new approach.

“I think we should lay the Brady plan aside and start something new.”