The new tougher approach to handling an international financial emergency are among the recommendations of a working group of senior officials from the Group of Ten industrial countries, approved yesterday at a G10 session, kicking off the formal agenda of the International Monetary Fund's annual meeting here.
Designed to head off a repeat of the Mexican crisis which was only contained by an ad hoc rescue package put together by the US, the IMF and the Basle- based BIS, the working group's proposals are but one part of a big effort by the fund that ideally would prevent such near-disasters from occurring - but that if they do, to make sure a mechanism is in place to cope with them.
To prevent a repeat of the Mexican debacle which caught markets and governments by almost complete surprise, the fund wants members to commit to publish improved financial and economic statistics that would permit a potential crisis to be detected in advance. More than two dozen countries have signed up to the scheme. But if the worst comes to the worst, warns the G10 report, "there should be no presumption that any type of debt will be exempt from payments suspensions or restructuring".
Wrangling, however, is holding up plans to double the IMF's resources to tackle crisis, by enlarging the general arrangements to borrow (GAB) credit line from the existing $25bn (pounds 16.5bn) to $50bn. This would be achieved by bringing in new countries alongside the G10 countries which currently contribute to the GAB. But the newcomers, who would operate a parallel "new arrangements to borrow" credit line, are insisting on equal ranking with the founder members. Some of these latter however insist on keeping a special status.
The discussions came 24 hours after top officials of the G7, the inner group of industrial nations, had agreed that the current economic slowdown in Europe, especially in Germany and France, is essentially over.
Addressing the IMF yesterday, Kenneth Clarke, said stronger growth should resume in continental Europe in the second half of 1996.Reuse content