The G-7 leaders will not be able to better regulate international money markets until they reduce their debts, Finance Minister Paul Martin warned yesterday.
The June meeting of the leaders in Halifax will discuss how to reform international financial institutions and regulation of money markets, Martin told a conference on improving government efficiency. He warned, however, new regulations won't replace the need for debt reduction.
''There is no quick fix out there that will help a country that has allowed its own balance sheet to get out of whack,'' he said.
''There is no amount of regulation or innovative ideas that is going to protect you.''
Martin said Canada's debt is undermining its economic sovereignty by eclipsing the country's sound economic fundamentals in the eyes of bond markets.
''The fact is, the bond market operates on a different set of standards and needs than does the real economy.
''But government must be in a position to respond to the real economy. And when it is over-indebted, when it has a balance sheet that is out of whack . . . then surely its role in the economy becomes suspect.''
Martin said there needs to be better surveillance and transparency in international money markets. Better fiscal records from countries would help achieve that aim, he said.
''Countries are going to have to be as open and consistent in the publication of their financial statements . . . as companies are, if capital flows are not going to operate in the way in which they do,'' he told the conference.
Just as Trade Minister Roy MacLaren did Monday, Martin threw cold water on a proposed tax on cross-border capital flows - the so-called Tobin tax.
''Unless the entire world is prepared to apply it, then it isn't going to function because somebody out there is going to be able to do without it,'' he said.
Martin suggested Team Canada may be revived to lead more trade missions, following the success of last year's visit to China by Prime Minister Jean Chretien and nine of the provincial premiers.
''At the last finance minister's meeting we discussed it quite extensively, and they tell me the premiers are ready to do it gain. I know the prime minister is ready to do it again,'' Martin said.
''The tremendous opportunities in export markets make it virtually impossible for any leader not to engage in it. So I think you'll see a lot more of that.''
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Revised: June 3, 1995
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