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G-7 ministers rule out Soviet bailout, take no action on dollar

By
JACK REED

LONDON -- The finance ministers of the seven most industrialized nations ended a daylong meeting Sunday giving no indication of immediate intervention to curb the strength of the U.S. dollar and making massive aid for the Soviet Union contingent upon the implementation of major economic reforms.

A final communique also signaled that the United States had failed to persuade its European trading partners, notably Germany, to lower interest rates to spur global economic recovery. Further reductions 'would need to reflect the differing situations in each country,' it said.

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In briefings after the Group of Seven ministers and their central bank governors met, officials confirmed Soviet President Mikhail Gorbachev would not be receiving a quick-fix aid package when he meets the G-7 leaders after their July 15-17 summit in London.

'I think everyone agreed that the important thing is actually to see the reform process under way in the Soviet Union,' British Chancellor Norman Lamont told a news conference.

'It is only the Soviet Union that can actually of itself bring about change and bring about reform, and massive aid by itself is not an answer to the problem,' he said. 'It very much depends on privatization, price liberalization, the encouragement of private enterprise and structual reforms.'

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Officials indicated, however, that the G-7 leaders would be discussing associate membership for the Soviet Union in the International Monetary Fund, which Lamont said would give the West a more effective method of monitoring the reform process.

The carefully worded communique said developments on the international financial markets had been reviewed following the dollar's surge over recent weeks and that the ministers agreed to cooperate closely 'if necessary through appropriately concerted action' to maintain orderly markets.

However, U.S. Treasury Secretary Nicholas Brady suggested such concerted intervention had been ruled out. It was noted, he said, that over the past three to four years foreign exchange markets had been 'orderly' and 'that this recent movement (of the dollar) fit within those orderly markets.'

The dollar began a rapid advance earlier this month and went to its highest level in nearly 19 months last Tuesday as U.S. economic indicators displayed signs America's economy is recovering from recession.

The climb was at least temporarily stayed, however, on news of the finance ministers' meeting and short-lived speculation that concerted action to control it was in the pipeline.

The meeting of finance ministers of Canada, France, Germany, Italy, Japan, the United States and Britain, coincided with positive indications that the economies of a number of the G-7 nations are emerging from recession or maintining growth, with improved growth forecasts for the second half of 1991.

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It was clearly a more upbeat assessment than that which followed the last meeting of the G-7 finance ministers in April.

Canadian Finance Minister Don Mazankowski recalled from the April meeting the 'concern emanating from the United States that recovery would not be imminent, and there are now signs recovery is emerging in the United States. We're pleased with the signals we are getting from Canada.'

The United States had sought lower interest from Germany to help spur recovery but it appeared from the communique that Bonn would pursue its own course as it wrestles with keeping inflation down while rebuilding the former East Germany.

'The ministers and governors emphasized the importance of fiscal and monetary policies which provided the basis for lower real interest rates and a sustained global economic recovery with price stability,' it said. 'They recognized that the approach taken would need to reflect the differing situations in each country.'

A swift and successful conclusion to the Uruguay round of trade talks was 'accorded the highest priority' by the G-7 ministers, the communique said, finding 'sustained expansion in global trade is an important engine of growth, including for countries throughout the world that are restructuring their economies.'

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'In light of the particularly difficult circumstances facing Eastern European countries and the Soviet Union, consideration should be given to measures which would enhance the trade prospects of these countries,' it said.

The G-7 ministers welcomed the reforms under way in Eastern Europe and affirmed the need for 'sustained reform' in the Soviet Union. The communique said the 'process of transition and fundamental reform is in the interest of ... these countries and global economic growth.'

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