Clinton calls for November summit on financial crisis
Tuesday 06 October 1998
The call for support came as the President met the UK Chancellor, Gordon Brown, in private in Washington last night, amid growing fears that the G7 group of richest nations has failed to do enough to reassure panicked investors around the world.
The meeting was expected to help set the tone for the Chancellor's crucial keynote speech to the IMF/World Bank meeting today. It will give crucial signals to the market on the Government's plans for dealing with the fallout from the crisis which has engulfed the City of London.
The President was expected to back UK calls for tighter regulation of world financial markets and also canvass support for his his plan to establish an emergency fund to bail out troubled emerging economies.
Yesterday the pound fell to its lowest level against the German mark for 18 months amid growing expectations that the Bank of England will cut interest rates this week to head off the threat of global recession.
But equity markets failed to revive on the prospect of lower borrowing costs. and the FTSE 100 Index fell a further 101.7 points to close at 4648.7. The air of gloom in London was reinforced by the latest Purchasing Managers Survey showing the lowest rate of growth in the service sector since July 1996.
The Bank of England's Monetary Policy Committee starts its two-day meting tomorrow with most pundits forecasting it will trim rates by a quarter point to 7.25 per cent. This would be the first rate cut since Labour came to power.
The gloom deepened when the Dow Jones Industrial Average tumbled more than 200 points to stand at 7572.54 by early afternoon in New York.
Bill McDonough a governor of the US Federal Reserve, warned of an incipient credit crunch. He said: "I believe we are in the most serious financial crisis since World War Two. If every institution tightens credit, I can assure you we will have a mess." Worries about the possible re-introduction of capital controls in emerging market economies continued to worry the financial markets.
The spectre of capital controls - opposed by most leading economies, including the UK - was raised by the Interim Committee, the main governing body of the International Monetary Fund (IMF), following its meeting on Sunday.
The committee said: "Temporary impediments to capital movements have been utilised under certain circumstances, and the committee asked the board to review the circumstances under which such measures may be appropriate."
Like the G7, the Interim Committee recognised that "the outlook for the world economy has worsened considerably". The committee added: "The downside risks to the current outlook have increased significantly".
Mervyn King, deputy governor of the Bank of England, yesterday became the latest in a long line of figures to spell out proposals for reforming the financial system.
Recommendations by Mr King, who co-chaired a G22 working group on transparency and accountability, included that banks spell out their exposure to hedge funds, that national authorities detail their foreign exchange liquidity position and that the international institutions, such as the IMF and the World Bank, bring an end to their culture of secrecy.
Leading article, Review page 3
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