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In case you
missed this. Story from Yomiuri
Shimbun below this: IMF Advances
'Sovereign Bankruptcy' Concept
http://www.washingtonpost.com/wp-dyn/articles/A17317-2002Sep28.html Opening
paragraphs:
“Top economic policymakers attending the annual meetings of the International Monetary Fund and World Bank agreed yesterday to speed efforts to
develop a "sovereign bankruptcy" procedure for countries in debt
crises. Making it easier for
countries facing catastrophic defaults to restructure debts would be a
significant change in the global financial system after crises that have rocked
South Korea, Russia,
and -- more recently -- Argentina and Brazil. Although proponents do not claim that the
procedure would eliminate all such crises, they believe it could substantially
reduce their severity. The IMF's
policy-setting committee directed the fund's staff to draft a detailed proposal
by next spring. The panel,
representing the IMF's 184 member nations, endorsed the idea in principle last
spring after an outline was put forward by Anne Krueger, the fund's deputy managing director. Perhaps more
important, Treasury Secretary Paul H. O'Neill,
whose department has waxed hot and cold on the idea, indicated that he is
prepared to push strongly for it and another approach, in which countries and their
creditors would be prodded to adopt more flexible loan terms. But while officials
voiced satisfaction with the progress they made on that issue and a few others,
their efforts to convey an image of mastery over the global economy were marred
by confusing statements over what Japanese policymakers might do to shore up their nation's ailing banking system.
Anxiety has risen in recent weeks that Japan's banking problems might erupt
into a full-fledged crisis, as the nation's stock market has plumbed 19-year
lows.” … O'Neill
was acerbic about the negative posture of many banks and large investors to a
sovereign bankruptcy mechanism.
Financiers strongly oppose the plan sketched out by Krueger, which would involve changing laws in many
nations to limit some rights of creditors of a country undergoing a debt
crisis. Part of Krueger's idea is to enable
countries to declare "standstills," or temporary suspensions of debt payments, when faced with panicky withdrawals of
money.” ANALYSIS
/ Shiokawa comment sows confusion @ http://www.yomiuri.co.jp/index-e.htm Masami Yamamoto and
Masashi Amano Yomiuri Shimbun
Correspondents 09.29.02 Confusion regarding
whether Finance Minister Masajuro Shiokawa
told U.S. Treasury Secretary Paul O'Neill
that public funds should be injected into banks at a meeting of senior Group of
Seven financial officials in Washington on Friday has sparked distrust among
other countries. In addition, the gaffe
committed on the international scene by the finance minister and the ministry
officials who denied the minister made the comment could have a negative impact
on domestic efforts to accelerate the disposal of nonperforming loans held by
banks. Japan pledged in the
G-7 meeting Friday that it would complete the disposal of nonperforming loans
by the end of fiscal 2004. "Finance Minister
Shiokawa didn't mention the injection of public funds into banks in the meeting
between the Japanese and U.S. finance ministers. It
was the minister's misunderstanding," said Tokutaro Nakai,
the ministry's public relations section chief, who rushed into the Japanese
press room after the G-7 meeting ended Friday midnight to retract Shiokawa's
words in the bilateral meeting with O'Neill. The bilateral meeting was held prior to the G-7 meeting. Shiokawa, in a press
conference after the series of meetings was completed, clearly told reporters,
"I told Mr. O'Neill my personal opinion that public funds should be
injected to dispose of banks' bad loans," adding, "I said so because
Mr. O'Neill asked me." Immediately before
leaving for Washington, Shiokawa said he would express his view that banks
should sort out healthy and unhealthy borrowers in order to solve the bad-loan
problem--the top priority for the nation's economy--and that public funds
should be used if banks become short of capital after following the process. Shiokawa's comment
after the G-7 meeting on the necessity of injection of public funds into banks
can be seen as planned
behavior to allow him to express his personal opinion, but the ministry officials denied that
the minister had done so. On the other hand, Shiokawa, maybe to save
face, on Saturday
morning once again dismissed the ministry official's denials. However, Shiokawa
changed the tone of his comments in a press conference at a Washington hotel
Saturday, saying, "It was when I stood chatting together with Mr. O'Neill
at informal times such as coffee breaks between the G-7 meeting sessions that I
told him my opinion." Shiokawa also told
reporters, "Even if it was just chatting, I think of it as a bilateral
meeting," reaffirming that he had told O'Neill about the necessity for the
disposal of banks' nonperforming loans through the injection of public funds. Meanwhile, O'Neill,
when asked Saturday at a press conference whether he heard from Shiokawa about
the injection of public funds into banks in the meeting Friday, evaded the
issue and only said that there was not enough time to discuss individual Japanese
policies. Japan
in spotlight at meeting At the latest G-7
meeting, with Japan's economic problems posing the largest threat to the world
economy, attention was focused on how the country could solve the problem of
banks' bad loans. During his mid-September's
visit to the United States, Prime Minister Junichiro Koizumi promised U.S.
President George W. Bush that Tokyo would accelerate the disposal of banks'
nonperforming loans. Shiokawa's comment on the injection of public funds into
banks made him the center of attention at the G-7 meeting. It is worth noting, given the uproar over Shiokawa's comments,
that a consensus has yet to be reached within the government concerning the
injection of public funds into banks. In addition to
Shiokawa, Heizo Takenaka, state minister in charge of economic,
fiscal and IT policy, has expressed support for the injection of public funds,
saying, "It's time to inject public funds into banks and drastically
dispose of the bad loans." However, Hakuo Yanagisawa, state minister
in charge of financial policy,
has maintained a more cautious stance toward the problem, saying, "The domestic financial system is not
in a critical situation and the injection of public funds is not needed." It remains to be seen
if the issue of the injection of public funds into banks will be settled and
the issue remains in a delicate balance because it is unknown whether
Yanagisawa will remain in his post following the Cabinet reshuffle expected
Monday. It is highly likely that the ministry officials
denied Shiokawa's comment because they do not want to be bound by an
international promise before the government and ruling parties make the final
decision on the problem. To what extent
Shiokawa promised the G-7 nations that Japan would pursue a policy of injecting
public funds into banks remains a mystery. However, Shiokawa made his position clear at a press
conference after the G-7 meeting ended, saying "Necessary public funds
will be actively injected to dispose of nonperforming loans held by banks."
Such a public comment is the equivalent of
an actual international promise to take drastic measures to speed the disposal
of the bad loans, including the injection of public funds. |
