Economic policymaking by the big boys dismays Luxembourg's leader

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JACQUES SANTER's nose was a bit out of joint. Mr. Santer, the prime minister of Luxembourg, had just been told by the press of Saturday's meeting of the Group of Five - the finance ministers of the United States, Japan, West Germany, Britain, and France. Here it was Friday, the day before. Of course Mr. Santer, who is also Luxembourg's President and finance minister, is under no illusions that the voice of a tiny nation like his own has great influence on the world's major economic powers.

He also knows that the Five usually try to avoid announcing their meetings in advance.

Nonetheless, Mr. Santer had expected the Europeans to negotiate a common policy before dealing with the Americans and the Japanese.

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At a meeting of the European Community's Council of Ministers on Feb. 9 in Brussels, Santer and the prime ministers (or chancellor) of the 11 other nations in this group had agreed that their finance ministers should work out a European position on international monetary affairs at a meeting in Knokke, on the Belgian coast, early next month. That would be just in advance of a meeting of the International Monetary Fund in Washington on April 9.

Now his counterparts in Britain, France, and West Germany were about to ignore their smaller European partners once again.

``They tend to neglect the little countries,'' Santer said in an interview shortly before his participation in a model United Nations at Harvard University. ``We weren't consulted.''

If the advance billing of the Group of Five meeting is correct, the finance ministers will have agreed by the time this appears in print to attempt to stabilize the US dollar at around present exchange rates on the currency markets. And Japan and Germany will have promised to stimulate their economies further.

They may also have established ``reference zones'' for the mark and yen. If the price of the dollar in terms of these currencies passes the upper or lower limits of these zones, the nations involved will agree to consult on what action to take.

Santer would like a firmer agreement. He would like the central banks of the US, Germany, and Japan to actively intervene in the foreign-exchange markets to defend the zone limits.

Otherwise, he says, the exchange markets ``could undermine all their decisions.''

Europe already has its monetary system binding together the currencies of several of the continental West European nations. It has bands for currency fluctuations that are relatively narrow compared with those envisaged for the major economic powers.

The European Monetary System has worked rather well. Occasionally, the value of currencies must be shuffled to reflect different inflation patterns or other factors. For businessmen buying and selling across European borders, however, the system provides some foreign-exchange stability.

Santer would also like to see Germany, Luxembourg's biggest trading partner, stimulate its economy by advancing and enlarging a planned tax cut and cutting interest rates further. He would prefer to see faster growth in Europe and Japan as a way of reducing the massive US trade deficit, rather than a further decline in the US dollar.

Secretary of the Treasury James Baker III could say ``amen'' to that view. He's been making that argument for more than a year.

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