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Russia: G7 Meeting To Plan Response To Crisis

  • Ben Partridge

London, 14 September 1998 (RFE/RL) -- Officials of the Group of Seven (G7) major industrial economies meet in London today to discuss how to respond to the economic crisis in Russia.

The ruble devaluation and fears over the repayment of Russia's debts have contributed to uncertainty on global markets, deepening fears the world may be on the brink of an economic slowdown.

Britain is hosting the London talks as current president of the G7 countries -- which groups Canada, France, Germany, Italy, Japan, and the United States. The talks will be held under the shadow of new economic gloom in Japan and Latin America.

Britain's finance ministry had no details of the agenda, but the senior officials of the G7 finance and foreign ministries will spend the better part of a day in discussions. Also taking part will be officials of the World Bank, EBRD and European Commission.

They are expected to focus on all aspects of the Russian breakdown, including the danger of high inflation, pressures on the Central Bank to print money, and problems in tax collection.

The London talks will be chaired by a British finance ministry official, Nigel Wicks, head of a team monitoring global markets. He will brief the world media later today (1630 CET).

A day after the talks, Britain's finance minister, Gordon Brown, representing the G7 presidency, flies to Tokyo for the first of a series of talks with his G7 counterparts about the world economy.

The talks are in preparation for a meeting of G7 finance ministers and central bank governors in Washington on October 3, on the eve of the annual meetings of the World Bank and IMF.

Brown will meet first in Tokyo with Finance Minister Kiichi Miyazawa to discuss possible solutions to Japan's economic woes.

The Japanese government said last week that its economy is still shrinking after one of the most serious economic downturns in its postwar history, and that the worst is still to come

Official figures show that gross domestic product in Japan fell by 0.8 percent between April and June, its third consecutive quarterly decline. It represents an annualized fall in GDP of 3.3 percent.

This slump in the world's second largest economy, accounting for two-thirds of Asia GDP, has had a ripple effect across Asia, contributing to the slump in Indonesia, Malaysia, and South Korea.

The new round of G7 consultations coincides with new worries about the economic health of the Latin American countries.

Brazil, which is South America's largest economy, last week pleaded to the G7 for help in protecting its national currency, the real, from the danger of forced devaluation.

In a bid to defend the currency, Brazil has raised its main interest rates by an unusual 20 points to almost 50 percent. It has spent almost a quarter of its foreign exchange reserves since the beginning of this month to prop up the currency.

In this climate of uncertainty, world financial institutions, banks and investors will be looking to the G7 over the next month in the hope of a concerted approach to tackle the ills. That process begins in London today with discussion of the problems of Russia.