Baker Effort Seen as Helpful but Not Far-Reaching
At first glance, Treasury Secretary James A. Baker III appeared to have made a major gain yesterday in his efforts to buoy the world economy.</br></br>The decision yesterday by seven European central banks to lower key interest ratescapped a 10-day period during which European governments announced a steady stream of fiscal and monetary measures aimed at spurring economic growth. The actions, which Baker strongly urged, raised hopes that the Treasury chief will soon engineer an international agreement designed to check the dollar's precipitous fall, hold down interest rates and avert worldwide recession.</br></br>Such an agreement, in turn, could bolster Baker's hopes of keeping the economy afloat during the 1988 election campaign, with obvious benefits for the Republican side.</br></br>But many economists caution that Baker's initiatives won't fundamentally alter the global economy's underlying problems. In their view, Baker appears to be obtaining only modest progress toward shrinking the huge U.S. budget and trade deficits and the need to borrow vast sums of money from abroad.</br></br>And as yesterday's steep stock market decline makes plain, Baker's efforts may not be enough to ward off new waves of pessimism in financial markets in the months ahead.