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Group of Seven Seeks to Steady World Markets

January 21, 1991|From Associated Press

NEW YORK — The United States and its wealthy allies are preparing a united effort to keep the Gulf War from throwing world financial markets into turmoil.

The commitment will include a pledge to spend billions from national treasuries, if necessary, to stabilize the dollar against other major currencies.

Calming jittery financial markets was just one of the tasks facing finance ministers and central bank presidents from the United States, Japan, Germany, Britain, France, Italy and Canada as they gathered Sunday for two days of discussions.

High on the U.S. agenda was obtaining commitments from Japan and Germany to shoulder a bigger share of the costs of the war. The failure of those two nations to pick up more of the tab has been a major irritant to Congress and, unless resolved, could spill over into areas such as trade.

Before the formal sessions got under way with a dinner Sunday night, Treasury Secretary Nicholas F. Brady met with Japanese Finance Minister Ryutaro Hashimoto to discuss the situation in the Persian Gulf.

Asked afterward whether the Japanese had committed to boosting their financial support for the allied effort, Brady responded: "They said they would do their share." He declined to provide any specifics.

A Japanese official, who spoke to reporters on condition that his name not be used, said no specific dollar figures were mentioned in the Brady-Hashimoto meeting. But the official did not rule out the possibility that the Japanese would announce a new support package for the war effort when the finance ministers conclude their discussions today.

Canadian Finance Minister Michael Wilson said he expected the discussions to focus on ways to keep the war from disrupting the global economy.

"We will be looking at what the impact of the Gulf War could be," he said. "Our concern is mainly on our economies and on the expectations in financial markets."

In particular, the leaders are searching for ways to make sure the recessions facing the United States, Britain and Canada don't become severe enough to trigger a global downturn.

But the overriding issue confronting finance officials will be the impact of the Gulf War on the global economy. So far, the news on world financial markets has been good, with stock prices rising and the dollar and other currencies remaining relatively stable.

The concern is what might happen if there is a period when war developments aren't so favorable.

With the United States already confronted with a weak economy and the prospect of the biggest federal deficit in its history, the fear is that foreign investors could suddenly dump their U.S. investments and send the dollar's value plunging.

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