G-7 Is Ready to Intervene in Currencies
WASHINGTON -- The financial leaders of the seven major industrialized nations, who will meet in New York next week, are prepared to intervene heavily to stabilize nervous markets in the event of war, U.S. officials said.</br></br>While the Persian Gulf crisis is expected to dominate the meeting of the so-called Group of Seven, the members will also focus on exchange rates and widespread fears that a possible rise in German interest rates could choke off economic growth in much of continental Europe, deepening the recession in the U.S., Canada and Britain.</br></br>To reassure foreign-exchange markets anxious about war, the New York meeting is expected to produce a strong statement showing unity of purpose in the G-7, which consists of the finance ministers and central bank governors of the U.S, Japan, Germany, Britain, France, Italy and Canada. There is, however, a general feeling among participants that the last few months have given the markets the time to absorb and discount many of the effects of the Gulf crisis, even war.</br></br>"The near-term risks in the market probably have more to do with short-term volatility than anything else," said a senior Bush administration official, who added, "we'll certainly spend time discussing the markets and the respective contingencies we have in place" to cope with a war.</br></br>The agenda for this G-7 meeting involves an unusually wide variety of important issues. The senior administration official listed the Gulf crisis and the question of financial burden-sharing and economic assistance to cope with the situation; the Soviet Union, particularly that country's prospects of membership of international financial institutions such as the International Monetary Fund and the World Bank; economic surveillance issues, including currency and interest-rate concerns; the stalled international trade talks; and debt-policy issues involving Poland, Egypt and Brazil.