‘Group of Five’ OKs Extending Dollar Strategy

Finance ministers and central bankers from the five major non-Communist industrial nations agreed Sunday to extend their cooperation to control the value of the dollar and rejected a proposal for a coordinated reduction of interest rates.

A terse statement issued by the British Treasury at the end of the two-day meeting expressed satisfaction with the drop of the dollar against European and Japanese currencies since the five nations began their joint effort to reduce its value last September.

“They agreed that cooperation should continue and that the progress which has been made should not be reversed,” the statement declared.

The meeting of the so-called Group of Five included Cabinet ministers and central bankers from the United States, Britain, West Germany, France and Japan.

The overvalued dollar has been a contributing factor to the large and growing U.S. trade deficit and to Japanese and West German balance-of-payments surpluses, particularly in the last two years.

Japan last week reported a record $46.1-billion surplus on the value of merchandise traded last year. This included a $39-billion surplus with the United States.

Correcting this imbalance in U.S.-Japanese trade has been a major goal of the currency adjustment strategy of the five countries.

There was no mention in the official statement of a discussion on interest rates. One source attending the meetings, who declined to be identified either by name or nationality, said that a proposal to coordinate a reduction of interest rates was rejected as impractical at the present time.

Japanese Finance Minister Noboru Takeshita and his French counterpart, Pierre Beregovoy, had publicly called for such action as a way of stimulating world trade and easing debt-servicing charges on the estimated $800 billion in Third World debt.

However, West Germany and the United States reportedly felt that, in the present economic climate, such a move might generate renewed inflationary pressures.

The representatives from the five economic powers also reportedly discussed, but apparently took no immediate action on, a plan presented by U.S. Treasury Secretary James A. Baker III to lend the financially struggling Third World countries an additional $47 billion over the next three years.

Nearly half of this money would come from commercial banks, with the balance from international agencies such as the World Bank.

The financial leaders from the five countries meet routinely to review global economic trends, usually attracting little publicity. However, the glare of media attention that accompanied last September’s meeting in New York, when the ministers and central bankers gave world money markets a warning of their commitment to bring down the dollar’s value, helped stir interest in the current meeting, the first since then.

That attention was heightened significantly when West German Economics Minister Martin Bangemann said last week that a plan to lower interest rates would be discussed at the meeting.