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Leaders mull role for IMF
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September 24, 2000: 11:06 a.m. ET
Policy makers chew over euro, oil and future role of world's largest lender
By Staff Writer M. Corey Goldman
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PRAGUE, Czech Republic (CNNfn) - What role the International Monetary Fund should play in keeping the global economy on track and how it should respond to the current economic threats of 10-year-high oil prices and the near record low European currency were the main topics of debate as international policy makers gathered Sunday.
 The IMF's policy-setting International Monetary and Financial Committee followed in the footsteps of the Group of Seven industrialized nations, which on Saturday collectively expressed concern about the effect of high oil prices and the low euro on their economies and on the rest of the world.
"We have strayed from a rational (oil) market equilibrium and it is our duty to reset this market's reference points," French Finance Minister Laurent Fabius said in remarks prepared for the committee. "If the current pressures were to be perpetuated, they could threaten the pursuit of global growth, as we have learned - in a different context, it is true -- from past oil shocks."
Most expect the 24 ministers within the IMFC committee will reinforce what the G7 have already stated -- that high oil prices could threaten global growth, and that the weak euro, if left to negative market forces, could begin to impact growth in the euro zone and other regions, by making imported goods less affordable.
Concern about the euro
The currency last week fell to record lows almost 30 percent below its January 1999 launch level before G7 central banks intervened to support it in the first concerted central bank action in five years. The euro closed Friday at 89.92 U.S. cents, up about 3 percent from Wednesday's all-time low of 84.42 U.S. cents, though still 25 percent below its inaugural price of $1.17.
 "There was a shared concern that if the euro continued to fall the way it did, it really had serious implications," Bank of Canada Governor Gordon Thiessen said Saturday. "We are going to continue to monitor this and we are not ruling out further action if it seems to be required."
To be sure, policy setters aren't looking only at oil and the euro. IMF Managing Director Horst Koehler, attending his first annual meeting since he took over at the fund in May, is expected to use the opportunity to outline his vision for the IMF as a global lender and its relationship with its sister organization, the World Bank.
"I have not come to the fund to turn it upside down," Koehler said. "But...there is a further need for change, and even accelerated change."
Koehler insists the IMF is on track to meet a target of providing large-scale debt relief for 20 debtor nations by the end of this year. Only 10 have so far qualified for help under the Highly Indebted Poor Countries, or HIPC, initiative, which promises to forgive their debt and allow them to put the extra cash toward health, education, education and infrastructure.
Europe needs a boost: Summers
Other issues include ways to involve the private sector in providing aid to crisis-hit countries and an evaluation of efforts undertaken so far to reform financial systems and make the world a safer place.
Mervyn King, the deputy governor of the Bank of England said on Sunday that the international community was at last making real progress on preventing financial crises.
 U.S. Treasury Secretary Lawrence Summers Sunday urged Europe to step up the pace of structural reforms needed to boost the continent's economy and put it on track for faster growth in the years ahead.
"In Europe, the stronger growth and reductions in unemployment are now arriving," he said in a statement to the IMFC. "But for better performance to endure, Europe will require substantial structural reforms" to free up its labor markets and help attract more investor capital.
In the U.S., Summers said, growth is strong and inflation remains low. Even so, he cautioned: "We are mindful that we must not take our expansion for granted."
While pleased with Japan's progress in finally shaking off its 10-year-plus economic slump, Summers cautioned that "it is critical to maintain supportive fiscal and monetary policies," a remark that some have taken as a signal to Japan's central bank to hold interest rates steady.
Staid demonstrations
Summers also spoke of strengthening the role of the IMF, noting that more selective financing, more stringent controls on lending, better conditionality attached to loans and a stronger program of crisis prevention through transparency were all areas in which the IMF could play a better role.
 As ministers gathered inside the Prague Congress Centre, demonstrators in central Prague denounced the IMF and World Bank's push for globalization - an effort they feel leaves too much power in the hands of rich nations and multinational companies and offers too few direct benefits for the world's poor.
Several hundred protestors demonstrated in a Jubilee 2000 march in the city center, where a statue of Stalin once stood marking the ascendancy of communism. The friendly, non-violent demonstrators representing religious groups and public sector unions and social activists young and old organized themselves into small bands as they walked the streets of Prague. One group included a faction of mothers from Scotland aiming to highlight their concerns about global poverty.
Many carried placards calling on creditors to "Drop the debt" and "Stop taking the money" from debtors. The march was scheduled for Sunday in large part because organizers wanted to distance themselves from potentially fractious demonstrations expected Tuesday. So far, the violent clashes predicted before the meetings have failed to materialize. 
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