*EPF506 09/22/00
Text: Treasury's Summers on Euro, G-7, IMF/World Bank Meetings
(U.S. policy unchanged in wake of euro intervention) (1300)
Treasury Secretary Lawrence Summers says U.S. foreign exchange policy continues to support a strong dollar even though the United States joined Japan, Britain, Canada, and the European Central Bank in buying euros to bolster the sagging currency.
Summers said during a Washington news briefing September 22 that the United States bought an unspecified amount of euros with dollars as part of a coordinated intervention in foreign exchange markets. He refused to elaborate on the extent and timing of the currency intervention, the second time since 1998 that the United States has attempted to support a weak currency.
Summers said in his prepared statement that the United States acted with the other nations because of "shared concern about the potential implications of recent movements in the euro for the world economy."
Each participant bought euros with its domestic currencies, Summers said. The last time the United States intervened to support a weakening currency was in 1998 to buy the Japanese yen. The joint intervention September 22 was the first for the euro since it was introduced in January 1999.
Summers travels to Prague to meet with finance ministers of the Group of Seven (G-7) major industrialized economies ahead of the World Bank and International Monetary Fund (IMF) annual meetings, which conclude September 28.
The global economic outlook, reform of international financial institutions, support for the Heavily Indebted Poor Countries (HIPC) initiative, and combating financial crime will highlight the G-7 finance ministers' meetings, Summers said. Additionally, he said, rising oil prices will be a major topic of the finance ministers' discussions.
"More stable prices in line with historic norms are in the mutual interest of both oil-producing nations and consumers," he told reporters. He would not elaborate on what policy options might be considered to blunt the recent run up in world crude oil prices.
Following are terms and abbreviations used in the text:
-- G-7: Group of Seven major industrialized nations.
-- billion: 1,000 million.
-- IMF: International Monetary Fund.
-- MDBs: multilateral development banks.
-- HIPC: Heavily Indebted Poor Countries.
Following is the text of Summers' statement as prepared for delivery:
(begin text)
[U.S. Department of the Treasury
Washington, D.C.
September 22, 2000]
FROM THE OFFICE OF PUBLIC AFFAIRS
STATEMENT OF TREASURY SECRETARY LAWRENCE H. SUMMERS AT THE PRE-G-7 PRESS CONFERENCE
Good morning. While this is no time for complacency, these meetings in Prague come at a time when global economic conditions are better than they have been for some time.
I expect our discussions to focus on two areas: the global economic situation; and the ongoing reform of the International Financial Institutions (IFIs).
I. The Global Economic Outlook
This being the final G-7 finance ministers' meeting of the Clinton Administration, it affords some opportunity to reflect on the first meeting I attended, in London in February 1993. At that time, slow growth and chronic public borrowing in the U.S. were of major global concern. How different the picture looks today.
-- Our economy continues to show strong growth with low rates of inflation, and this year we will have achieved three consecutive years of unified budget surpluses, totaling over $400 billion. But we must not take our economic expansion for granted. We must continue to plan prudently: paying down the debt and maintaining fiscal discipline.
Looking beyond the U.S.:
There have been welcome signs of stronger economic growth in all of the other major industrialized countries. But supportive policies continue to be essential, especially structural reforms to raise productive potential and investment and realize the opportunities afforded by new technologies.
The emerging market economies have strengthened since the recent crises, as recovery has taken hold and financial vulnerabilities reduced. But here too, it will be crucial to avoid complacency. Strong follow-through on financial sector restructuring and other reforms will be crucial.
-- While the global fundamentals are sound, recent developments in oil markets are obviously a concern for consumers and businesses and around the world. I expect that energy market issues will be among those discussed in Prague this weekend. More stable prices, in line with historic norms, are in the mutual interest of both oil producers and consumers.
-- With regard to exchange rates, let me repeat the statement that was released earlier today:
-- "At the initiative of the European Central Bank, the monetary authorities of the United States and Japan joined with the European Central Bank in concerted intervention in exchange markets because of their shared concern about the potential implications of recent movements in the euro for the world economy." The British and Canadian authorities also took part in this operation, purchasing euros with their currencies.
Our policy on the dollar is unchanged. As I have said many times, a strong dollar is in the national interest of the United States.
II. Reform of the International Financial Institutions
Reform of the IMF:
We welcome the recent Board agreement to reform IMF facilities. These changes will help to establish the more focused and selective financing role for the Fund that the U.S. has strongly supported. In this context and more broadly, we will also continue our discussions of private sector involvement in the resolution of crises. And, in line with recent progress toward reducing financial vulnerabilities in the emerging market economies, we will consider how the IMF could further integrate indicators of national balance sheet risk into its surveillance and programs.
Reform of the MDBs:
We want to address more fully the provision of support by the MDBs at a time of financial crises. In particular, we will urge the World Bank to consider how to expand the use of the emergency financial vehicles that it now has in place, and of the pilot programs they have introduced to make more innovative use of guarantees in support of proactive policy reform. We will also address the need for greater institutional accountability and transparency within the World Bank and the MDBs more generally.
Support for the Poorest Countries:
We continue to be strongly committed to maximizing the effectiveness of the HIPC debt relief initiative. In Prague we aim to agree on clear and achievable conditions for providing debt relief that enable the funds to be provided as rapidly as possible, while ensuring there are strong safeguards to maximize the chances of success. We are also supporting concrete reforms to the provision of assistance to such nations, so that the recipients of HIPC relief do not get into the same difficulties again.
We recognize that the U.S. needs to do its part to keep HIPC moving forward. We are working hard to obtain Congressional approval of the President's pending requests for HIPC funding and authorization so that the U.S. can fulfill its commitments. We will also be calling for enhanced support for the provision of global public goods, such as vaccines and effective treatments for diseases such as HIV/AIDS and malaria, and agricultural and environmental research -- including a multi-year program of increased Development Grant Facility funding for such projects within the World Bank.
Combating financial crime:
There is now widespread agreement that financial crime has the potential to negatively affect the international financial system. Given the natural fit between the financial crime agenda and the IFIs' focus on the integrity of the global financial system, their financial sector work, and their promotion of good governance, we are working to ensure that both institutions to play their part in combating this problem. These issues will be firmly on the agenda of both the IMFC and Development Committee in Prague.
(end text)
(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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