Greenspan''s 1981 essay confirms government''s interest in controlling gold price


By Steve Goldstein and Aude Lagorce
Saturday, February 5, 2005

LONDON -- The Group of Seven finance ministers and top central
bankers of the world's leading industrialized countries on Saturday
failed to come to a consensus on debt relief for the world's poorest
countries and did not alter their year-long stance toward the
foreign-exchange market.

In addition, hopes that China would be pressured into revaluing its
currency, the yuan, didn't materialize.

In its communiqu, the G-7 affirmed that exchange rates should
reflect economic fundamentals and said it wanted more flexibility in
exchange rates. The language was identical to that issued at Boca
Raton, Fla., last February.

China's central bank governor Zhou Xiaochuan, told local Chinese
media that the country didn't face pressure.

"If we had a very big current account imbalance, there may be
pressure, but China only has a small current account surplus ... so
the pressure is not great. But of course with some countries the
imbalance is large," Zhou said.

That imbalance is particularly acute with the U.S., where the peg of
8.28 yuan to a dollar has left the U.S. with a deficit with China of
$147.7 billion, according to data through the end of November.

John Taylor, under secretary of the treasury for international
affairs and the U.S. representative at the London meeting, said
Saturday that bilateral talks with China were "successful."

European countries, themselves troubled by the weakness in the U.S.
dollar, were pleased to have a mention in the communiqu that the
U.S. has agreed "to fiscal consolidation."

French Finance Minister Herve Gaymard, at a press conference, said
he saw no reason to doubt the sincerity "of his American friends"
when they pledged to control their deficit and said signs from the
U.S. on the dollar were "encouraging."

On debt, the differences were far more stark.

The G-7, meeting a day after former South African President Nelson
Mandela called on leaders not to look the other way on world
poverty, agreed to provide up to 100 percent relief from bilateral
debt to what are called Heavily Indebted Poor Countries. The group
will consider on a case-by-case basis relief for HIPC countries that
have multilateral debt.

"London 2005 will in my view be seen as the 100 percent debt relief
summit," the G-7's host, U.K. Chancellor Gordon Brown, said at a
news conference.

The ministers said they would push to the G-8 summit in July a
discussion for Brown's favored International Finance Facility plan;
Brown said he agreed to push back the proposals because he hopes to
pick up more support.

Brown's IFF called for G-7 backing to borrow as much as $100 billion
up front on bond markets, and to distribute the money over 10 years.

The U.S.'s Taylor said Saturday that he still doesn't approve of
Brown's IFF plan, arguing the plan would violate the U.S.
appropriations process. But he also didn't express hostility to the
U.K. going ahead without them.

"The IFF may be good for them. ... Let me not quarrel about the
different approaches," he said.

Germany and France, for their part, issued a statement on
development aid apart from the G-7, though they gave some support to
Brown's proposals.

The two nations said they back a pilot International Finance
Facility for immunization, and support a tax on international air
travel, such as taxes on airline fuel or charges on plane tickets.
France and Germany plan to present the plan to the EU, and said they
hope to launch it by year's end.

Gaymard said the plane-ticket plan itself could raise as much as $3

The U.S. wasn't quite as complimentary to this proposal, as Taylor
said he didn't see value in the global tax plan first presented by
French President Jacques Chirac in Davos.

Other highlights of the G-7 included the call for better oil data,
increased medium-term energy supplies and energy market
transparency. Taylor said the G-7 reference toward oil was primarily
about getting better data from non-OECD countries in a bid to have
less energy price volatility.

The G-7 said in its communiqu that the economy should
remain "robust" in 2005.

"Since our meeting in October, the economic cycle has matured and
global growth moderated, but is expected to remain robust for 2005.
Risks are balanced, though global imbalances remain," it said.


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