-Caveat Lector-

Sunday, February 21, 1999 Published at 12:48 GMT

G7 calls for debt relief

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G7 calls for debt relief
Finance ministers from the seven leading industrialized nations have called
for improvements in the arrangements for debt relief for some of the world's
poorest countries.

After a day of talks near Bonn, G7 ministers said they had discussed ideas for
making debt relief available more quickly.

But the BBC Economics Correspondent Andrew Walker says their proposals fall
short of debt cancellation for the worst hit countries -- an idea urged by
many charities.

Some of the UK's biggest pop stars endorsed their support for Jubilee 2000,
the campaign calling for the debts to be written off, at the recent Brit
Awards. And the founder of Band Aid, Bob Geldof, said on Sunday that there was
a strong practical and moral argument for canceling the debt.

'Stability forum'

The finance ministers also agreed to establish a Financial Stability Forum to
watch for warning signs of potential market turmoil.

The forum, proposed by the head of the German Bundesbank, Hans Tietmeyer, will
urge global financial regulators to cooperate more closely.

The new body will be made up of senior officials from G7 countries as well as
representatives of international institutions and regulatory bodies.

"Ultimately the process of strengthening cooperation should make a significant
contribution to a better functioning of the financial markets.

"This will make possible a full utilization of the considerable benefits which
free capital movements provide to all participants in the global financial
system," Mr. Tietmeyer said.

Leaders to discuss in June

But our economics correspondent, Andrew Walker, says the proposal still has to
be discussed by G7 leaders at their summit in June.

The request for ideas for keeping a closer eye on the flow of footloose
capital came after world markets slumped following Russia's de-facto default
on its foreign debt last summer.

It is proposed that the forum international bodies will meet at least twice a
year. Sweeping changes to the way the global financial system is supervised
have been ruled out.

State of the world economy

The state of the world economy was another main item on the agenda of the day-
long talks, which officials called friendly and constructive.

The US Treasury Secretary Robert Rubin said that it was "crucially important"
that Japan and Europe do more to stimulate domestic demand, to suck in more
goods from developing countries desperate to export their way back to economic
health.

Mr. Rubin had said previously the US could not continue indefinitely as the
consumer of last resort for the world economy without stoking protectionist
pressure at home and building up a dangerously large trade deficit.

In a statement issued at the end of the day-long talks the G7 ministers said
that the outlook for global growth had deteriorated despite encouring trends
in Asia and calmer financial markets.

They added that foreign exchange rates should reflect economic fundamentals,
and agreed to work together to avoid excessive swings and significant
misalignments in currency markets.


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