WASHINGTON -- Despite renewed pressure from Europe to establish greater links between the world's major currencies, the Clinton administration said Wednesday it remained strongly opposed to the idea.
Treasury Secretary Robert Rubin said he believed proposals to more closely link the dollar with the Japanese yen and Europe's new euro would likely at some point put U.S. domestic economic interests at odds with maintaining some type of fixed exchange rates.
Officials in France, Germany and Japan have endorsed searching for ways to more closely link the currencies of the United States, Japan and Europe as a way to reduce the extreme volatility in exchange markets witnessed in recent years.
Rubin's comments preceded an official U.S. visit by French President Jacques Chirac later this week. Chirac will try to sell his ideas for greater coordination in meetings at the International Monetary Fund and the World Bank and in discussions with President Clinton.
In addition, finance ministers and central bank presidents of the world's seven richest industrial countries -- the United States, Japan, Germany, France, Italy, Britain and Canada -- will meet Saturday to review progress in overhauling the global financial architecture.
The G-7 leaders committed themselves to this effort last May at their annual summit in Birmingham, England, but so far have made only modest progress in working out details of just how to accomplish the goal. The currency crisis, which began in Thailand in July 1997, has pushed one-third of the globe into recession and left economic policy-makers scrambling to come up with ways to tame turbulent financial markets.
As he has in the past, Rubin stressed the urgent need for Japan to push forward with efforts to lift its own economy out of recession as a key to restoring growth to its troubled Asian neighbors.
Rubin warned that the soaring U.S. trade deficit, which is at a record level, is not sustainable and therefore other developed nations including those in Europe must do their part to take exports from crisis nations.
Writing in today's Wall Street Journal, Chirac argued that the world's major economic powers must come up with better ways to coordinate economic policies.
"It is up to the United States, Europe and Japan to preserve a world environment conducive to growth -- and growth depends on stability between our currencies," Chirac wrote in a Journal op-ed piece.
While Chirac did not spell out a specific proposal, one idea being explored by Germany, France and Japan would establish "bands" for the major currencies and informal agreements to jointly intervene in currency markets when the dollar, yen or euro threatened to break out of its assigned trading levels.
But Rubin said today such an idea would ultimately be doomed to create even more speculative turbulence.
"Bands become wonderful speculative targets for those who are worried about speculation," he told reporters.
The U.S. position makes it unlikely that the other G-7 members will get very far with any proposals to link currencies more closely. But Rubin suggested the G-7 meeting, which will also be attended by Federal Reserve Chairman Alan Greenspan, would reach more modest agreements in other areas.
He said the G-7 countries were ready to endorse a proposal to promote better and more timely release of the foreign currency reserves held by countries. Failure to adequately reveal reserve positions has been cited as a key triggering event of the currency turmoil in both Thailand and South Korea.
Rubin said the group would also likely favorably review a proposal by a study group to create a forum for financial regulators to coordinate regulation of financial markets. This idea is being put forward by officials from G-7 and developing countries who have been working under the direction of Hans Tietmyer, head of the German central bank.
Rubin said this informal working group would meet again in Germany in mid-March and again in Washington in April to seek agreement on further ways to prevent or at least handle global economic turbulence.