Report by BIS Warns U.S. of Deficit Risks: International Bank Warns U.S. Deficits Threaten Re
The Reagan administration must reduce sharply its huge budget deficits, which cause high interest rates, or be saddled with the blame for not only an aborted global recovery, but also a continuing Third World debt problem, the Bank for International Settlements at Basle said yesterday.</br></br>In its annual report, the BISÛÓ sometimes called ÛÏthe central, banksÛª central bankÛÛÓasserted that high U.S. interest rates are ÛÏdamaging,Û and that the responsibility for getting them down ÛÏclearly falls on the U.S. authorities, and squarely on the shoulders of those in charge of fiscal policy.Û</br></br>The report also warned that there could be a second wave of trouble on the international debt front, characterizing the rescue packages put together last year and early this year as ÛÏholding operationsÛ that provided ÛÏa vital breathing spaceÛ and that now must be followed by concerted action.</br></br>It stressed that the debt situation ÛÏcannot be kept within manageable bounds without the effective participation of [private] banks,Û urging that the banks maintain ÛÏsteady nervesÛ and ÛÏnot withdraw from new international lending.Û</br></br>Lower interest rates would be a tonic for the hard-pressed Third World debtors, the report pointed out. It warned that, while an international debt crisis may have been averted so far, ÛÏThe worldÛªs financial system remains basically fragile.Û