Blair focuses on IMF reform
Prime Minister to meet Greenspan for talks on fund's future in wake of Asian crisis
Sunday 01 February 1998
The meeting - an unusual one as heads of state do not usually meet with central bankers - will take place during Mr Blair's trip to Washington, which starts Wednesday. It is one of a complex set of international financial diplomatic manoeuvres currently underway. Because Mr Blair is President of the European Union and host of May's Group of Seven summit in Birmingham he finds himself at their centre. Mr Blair will also discuss the Asian financial crisis when he meets with President Clinton.
"We and our European partners have to recognise the Asian crisis is global and that the IMF is not just run by the United States," said a senior British official in Washington.
The US has traditionally taken the lead in directing IMF bail-outs like the one during the Mexican financial meltdown at the end of 1994, leaving Europe watching on the sidelines. Now the EU, whose members contribute 30 per cent of the IMF funds compared with 18 per cent for the Americans, want a bigger say.
"Exports from European Union countries to the region (Asia) are greater than those from the US. The exposure of European banks is greater than the sum of US and Japanese exposure," Chancellor Gordon Brown wrote in a recent letter to Michel Camdessus, managing director of the IMF, a copy of which has been obtained by the Independent on Sunday."
In that letter Brown outlines some suggestions for reform of the way the IMF operates - ideas likely to be taken up by Mr Blair in his meetings with Mr Clinton and Mr Greenspan. These include:
q The IMF "promoting a code of conduct on transparency in fiscal policies" and economic and financial developments in borrowing countries.
q An increase in the transparency at the IMF itself by encouraging it to go public on more of its activities, such as when a country continually ignores its advice.
q Making the IMF pay more attention to the vulnerability of its financial systems to potential shocks and reversals in capital flows.
q Finding ways to ensure private investors play a full role in resolving financial crises.
q Improving the assistance given to developing countries in strengthening their financial systems by the IMF and better co-operation with financial reg- ulators in emerging markets.
"Like my European partners, I believe it is essential to keep the IMF at the centre of the global response to what is a global problem" wrote Mr Brown, reiterating the EU's full support to the measures taken by the IMF in resolving the Asian crisis.
The IMF has promised $100bn (pounds 61bn) in loans to help the Far East economies meet their financial obligations and restore confidence in their banking systems.
The Government's plan seems to be to formulate a common EU view for IMF reform at a meeting of EU finance ministers in Brussels on 16 February, which Mr Camdessus will attend.
Mr Brown originally invited Mr Camdessus to attend an informal meeting of EU finance ministers on 20 March, but the date was brought forward, indicating the importance being attached to IMF reform. These viewpoints will then be carried into a G7 finance ministers meeting in London on 21 February. A decision by the G7 could then pave the way for agreement at the IMF's Interim Committee in the Spring.
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