America calls on G7 to tackle Asian crisis

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The Independent Online
The US Government last night unveiled plans for a high-level meeting of the leading industrialised nations, including Britain, to develop new methods to deal with the growing Asian financial crisis.

The initiative, which was confirmed by a US Treasury spokeswoman, comes amid growing opposition in Congress to committing US taxpayer money to multi-billion dollar bail-outs for the troubled Asian nations.

"The United States plans to convene a meeting of finance ministers from key countries around the world to explore implications of the current financial situation in Asia and ways to deal with these challenges," the spokeswoman said.

"We are in the process of consulting with the G7 [group of seven industrialised nations] and other countries to look at possible approaches going forward."

The spokeswoman declined to give a date for the meeting or to say whether it could be held as part of a scheduled meeting of G7 finance ministers in Britain in late February.

The news will be another boost for Asia's markets. Both shares and currencies yesterday rallied for a second day on optimism that the region's financial crisis might be bottoming out.

Indonesian markets led the gains, with the stock index surging as much as 9 per cent and the currency 16 per cent. Meetings between President Suharto, a US presidential envoy and International Monetary Fund officials allayed concerns the IMF might suspend more than $43bn (pounds 26bn) of aid to encourage the government to cut spending and deregulate the economy.

The IMF's managing director, Michel Camdessus, said it would seek a "dramatic acceleration" of reforms in Indonesia. He is drafting a new letter of intent on reform, after increased spending in Indonesia's budget last week sparked concerns the country was not serious about reform.

A confidential study by the IMF acknowledged that an important element of its rescue strategy for Indonesia backfired, causing a bank panic that helped set off financial market declines in much of Asia, according to a report in the New York Times. Instead of inspiring confidence as hoped, bank closures helped bring Indonesia's banking system to the brink of collapse.

Meanwhile George Soros, the billionaire investor, yesterday warned the region's financial crisis was "a wildfire that has not yet been tamed".

"Developments in Asia have the power to destroy the system of world trade," he said, adding that a spill-over of the crisis to China and Latin America could not be ruled out.