The leading industrial countries want to create a special fund to protect countries struck by runs on their currencies, according to a leaked draft communique from the upcoming G-7 summit in Halifax.
The 11-page communique, which will be signed by the G-7 leaders, covers a range of international economic issues and political concerns. A draft of the communique was made public yesterday by New Democratic Party MP Nelson Riis.
Finance Minister Paul Martin downplayed the draft document, saying there are still final discussions by the G-7 leaders that could significantly change the final summit communique, the set of proposals agreed to by all the G-7 countries.
The draft document dwells on growth and employment issues with the leaders agreeing that economic growth alone will not be sufficient to address the problem of unemployment in their countries.
''Creating good quality jobs and reducing unemployment - which remains unacceptably high in too many countries, is thus an urgent priority for all of us,'' the communique, said. French president Jacques Chirac has been pushing to have unemployment moved to the top of the summit agenda.
But, the continuing emphasis on sound fiscal and monetary policy has to be coupled with specific measures to upgrade the skills of workers and create greater flexibility in labor markets to adjust to changes in the economy, the communique said.
Prime Minister Jean Chretien has emphasized the need to reform international financial institutions and deal with problems such as currency instability. The run on the Mexican peso that began last December and the multi-lateral intervention needed to help Mexico has prompted concerns about international financial movements.
''The developments in Mexico earlier this year have sharpened our focus on these issues,'' the communique said.
The G-7 leaders of Canada, the U.S., France, Britain, Germany, Japan and Italy want the International Monetary Fund to develop an ''early warning system'' of indicators that could point to incipient currency crises.
As well, to provide a financial backstop to help in the case of another Mexican-style crisis, the G-7 leaders want to set up an ''emergency financing mechanism.'' The communique states that the leading industrial countries may have to increase their special IMF financial contributions to support the creation of this financing mechanism.
Part of the draft communique contains a so-called bracketed text, which means the countries have yet to agree to the measure. One of the bracketed measures is a proposal to allow the IMF to borrow money in private financial markets as a source of funds.
The draft communique says that these measures may not be enough and other ''market-based mechanisms'' should be studied to see if they can be useful in stemming currency crises. There is no mention of the special tax on international currency transactions, the so-called Tobin tax which has attracted the support of many labor and social organizations. A currency transaction tax is seen as a way of both raising money and dampening international currency speculation.
The G-7 members support the idea of improving international regulation and supervision of financial institutions. The leaders want their finance ministers to review the system for international supervision and report back at next year's summit.
There are also a series of proposals that would have the result of the IMF and the World Bank, the two major international financial institutions, working more closely together and eliminating overlap and duplication.
There is obviously more to be negotiated by the leaders in the area of these international financial institutions since much of the text is bracketed in the draft communique.
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Revised: June 3, 1995
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