1. The Ministers and Central Bank Governors of the G-7 countries met today to review recent developments in the world economy and financial markets.
2. Together with the Managing Director of the International Monetary Fund, Michel Camdessus, we examined the outlook for the G7 economies and the rest of the world and exchanged views on policy requirements.
3. We discussed recent economic developments in our countries. We agreed that there were encouraging aspects; inflation remains low and growth in the G7 as a whole continues at a solid yet sustainable pace. We agreed on the importance of implementing policies to promote sustainable non-inflationary growth, foster sound public finances, and meet the challenges of the aging of our populations. Our countries' circumstances differ. In some, where growth has been strong and accompanied by vigorous job creation, we need to be watchful in particular about inflation. In others, the major challenge is to achieve the objective of strong domestic -demand led growth without risking price stability. Where unemployment remains high, further structural reforms aiming at improving the functioning of labor and product markets should be implemented as necessary.
4. In the context of surveillance, we reviewed recent developments in South East Asia. We expressed satisfaction with international efforts to assist Thailand. We expect the Thai authorities to implement vigorously the Fund program and continue to cooperate with the IFI's. We agreed on the importance of minimizing contagion and will continue to monitor closely developments in Asian markets. In that regard, we welcomed measures recently announced in some of the economies to address macro economics issues. We also underscored the importance of implementing additional measures to enhance the transparency and supervision of financial systems.
5. We also reviewed recent developments towards EMU.
6. We discussed recent developments in exchange and financial markets. We agreed that exchange rates should reflect economic fundamentals and that excess volatility and significant deviations from fundamentals were undesirable. In this context, we emphasized the importance of avoiding excessive depreciation where this could lead to the reemergence of large external imbalances. We agreed to monitor developments in exchange markets and to cooperate as appropriate.
7. We also discussed the report that the Finance Ministers will make, commissioned by the Denver Summit, on international financial stability. We agreed to work closely with appropriate international bodies and national authorities to encourage further progress in this area, including regional dialogue with IFI's.
8. We discussed the meeting on employability to be held in London on February 22, 1998 in preparation for the Birmingham Summit.
9. We discussed the economic situation in sub-Saharan Africa, which was also accorded a high priority by the Summit Leaders in Denver. We welcomed efforts by the IMF and the World Bank towards reinforced IFI support for Africa. We emphasized the crucial importance of assuming our commitments to the multilateral development funds.
10. We reviewed debt problems facing some developing countries. We welcomed recent decisions on HIPC eligibility for Bolivia and Burkina Faso and look forward to further progress on other countries. We encourage the regional development banks to follow the example of the World Bank in developing mechanisms using their own resources to provide interim relief, to the extent necessary.
11. We welcomed an agreement on an "equity" allocation of Special Drawing Rights
and further progress on an amendment to the IMF's Articles of Agreement regarding
the liberalization of capital movements.
We welcomed an agreement of today on the Eleventh General Review of Quotas, which ensured the continued ability of the IMF to fulfill its responsibilities for the international monetary system, recognizing more fully in the distribution of quota shares the present economic position of Member countries. At the same time, we welcomed progress made so far in the New Arrangements to Borrow and urged completion as soon as possible by participants of all actions necessary to enable them to carry out its terms and conditions.
12. Joined by the representatives of the European Commission, we met with Russian authorities to exchange views on the economic situation and outlook in Russia. We welcomed Russia's record of good performance under the current EFF, although further improvements of the revenue situation is crucial. We welcomed the very recent agreement reached between Russia and the Paris Club on the conditions of Russia's participation as a creditor in the Paris Club. They agreed that this agreement is a very important step in Russia's integration in the international financial community.
13. The globalization of national economies has resulted in the challenge of increasingly harmful international tax competition. As stated in the Denver Summit statement, tax schemes aimed at attracting financial and other geographically mobile activities can create harmful tax competition between states, carrying risks of distorting trade and investment, and could lead to the erosion of national tax bases. Harmful tax competition also undermines the fairness and neutrality of tax system[s]. Hence, we attach great importance to the work undertaken by the OECD and welcome its outreach beyond OECD member countries on this issue. We hope that the OECD can produce its conclusions and recommendations on this subject in time for consideration at next year's Summit.
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