The Scramble to Find a Fix
BOSTON — The world is scrambling to avoid a financial and economic meltdown.
Country after country is taking action to emerge from or avoid being caught in a crisis being billed as the worst in 60 years.
Ambitious plans for reform of the international monetary system were being floated and discussed at the gathering of central bankers and finance ministers from around the globe last week in Washington. But decisions are months away.
Meanwhile, national governments are trying to save their bacon from the fire.
In the United States, the Federal Reserve last month cut short-term interest rates a quarter of a percentage point. Canada followed suit the same day.
Chairman Alan Greenspan hinted last Wednesday that more reductions were in the works. "This is a time for monetary policy to be especially alert," he said.
Congress finally approved $18 billion billion for the International Monetary Fund. The money, combined with funds from other member nations, will provide the multilateral institution with more-adequate resources to rescue other nations facing severe payments problems.
Republicans in the House of Representatives had held up the IMF money but felt the political heat building and passed it after attaching a face-saving "reform package." Not funding the IMF could damage the domestic economy.
""We can debate how to reform the operations of the fire department, but there is no excuse for refusing to supply the fire department with water while the fire is burning," President Clinton told the IMF and World Bank meeting Tuesday.
In Europe, Spain cut its short-term rates by half a percentage point Tuesday. Britain's Bank of England did the same Thursday when its policymakers met.
Nonetheless, analysts assume rates will come down for much of Europe in the next few months as the Continent aims for introduction of the euro currency Jan. 1.
Bank of England Governor Eddie George warned in Washington that rate cuts alone could not solve the world's economic problems. But he promised the bank "will act as necessary to stimulate demand with consistently low inflation."
In Japan, lawmakers moved closer to a deal to pump public funds into weak banks and shore up a shaky financial system. The ruling Liberal Democratic Party submitted bills to parliament last Wednesday allowing the government to buy shares and fire the management of "extremely undercapitalized" banks.
With the news, Tokyo stock prices shot up more than 6 percent for the day.
Further, Japanese Prime Minister Keizo Obuchi announced plans for a bigger economic stimulus package. Japan is in its worst recession in 50 years.
US officials and those of other nations have been long calling on Japan to reinvigorate its economy, the world's second-most powerful. Such action is seen as essential to boost other nations in Asia.
Negotiations were still under way last week for a $30 billion rescue package for Brazil. The hope is to persuade investors that Latin America's largest economy will not tumble into crisis.
Coordination of economic policy, urged by many to counter the crisis, hasn't happened. Many financial leaders at the Washington gathering lamented what they saw as a weakened US president.
"They are appalled at the American political way that seems to have incapacitated a president at precisely the moment when he should be exercising global leadership," notes Stephen Roach, chief economist of Morgan Stanley, a New York investment-banking firm.
In the meantime, British Prime Minister Tony Blair has suggested an emergency economic summit in London next month. It is being considered at the White House, the wires report.
But revising today's Bretton Woods international monetary system is not the work of a day. It won't happen quickly.