Leaders of Free World End ‘Easiest’ Economic Summit : Agree on Plan for Currency Coordination

The Free World’s most influential leaders wound up their “easiest” economic summit today, announcing an unprecedented plan to coordinate their economies before retiring to a glittering banquet given by Emperor Hirohito.

The seven national leaders urged Soviet leader Mikhail S. Gorbachev to hold a second superpower summit with President Reagan and to remove Soviet forces from Afghanistan. The leaders also praised an agreement promising sanctions against Libya and other sponsors of international terrorism.

Despite reports of a heated discussion Monday, Treasury Secretary James A. Baker III said “it was a smooth summit” and French President Francois Mitterrand called it “probably the easiest” since the annual meetings involving the United States, Japan, Britain, France, West Germany, Italy and Canada began in 1975.

British Prime Minister Margaret Thatcher added, “We have achieved our objectives--in short, mission accomplished.”

Apparent Contradiction

However, at least two leaders appeared to contradict U.S. claims that a summit resolution endorsed the future use of military action against sponsors of terrorism.

In their last official function, the leaders dined at the Imperial Palace on swallow’s nest soup, fish stewed in sake and roast leg of lamb while they were attended by more than 100 butlers in formal attire. They were entertained with ancient Gagaku music and traditional 10th-Century dances.

In an afternoon report on the leaders’ political discussions, Japanese Prime Minister Yasuhiro Nakasone said the leaders discussed developments in the Soviet Union under Gorbachev and expressed hope for a second U.S.-Soviet summit.

In their final economic statement, the seven leaders announced provisions for an unprecedented coordination of their currencies and set up a mechanism for monitoring their economies.

Agree on ‘Managed Float’

Moving away from the free-floating currency exchange system previously touted by the Reagan Administration, the nations agreed to establish what they called a “managed float” in a bid to tame their wildly fluctuating exchange rates.

Under the system, the seven countries will keep their currencies in a range to be determined by such economic indicators as growth rate, gross national product, consumer price index, interest rates, unemployment, fiscal deficit and trade balances.

The leaders also agreed that Italy and Canada will join the others in the Group of Five finance ministers, now to be called the Group of Seven, whose quiet manipulations have been largely behind the recent drop in the value of the dollar.

Other highlights of the economic statement included:

--A commitment to cut spending to reduce excessive fiscal deficits.

--Endorsement of a U.S. plan to deal with Third World debt.

--Studies of agricultural subsidies, which are causing food surpluses that disrupt Third World economies.

Threat by Abbas

The issue of terrorism, which has dominated the summit, was underscored by a threat from Palestinian radical Abu Abbas, in a broadcast report, to target America for terrorist attacks.

“Let him try,” President Reagan declared, responding to reporters’ questions.

Although summit leaders approved a tough anti-terrorist statement on Monday, branding Libya as a sponsor of terrorism, Nakasone emphasized that there was no mention of sanctions.

“There is no change in (Japan’s) Middle East policy,” Nakasone told a news conference. “This (summit statement) is intended to defend us from terrorism and does not mean we would adopt economic and other sanctions.”

Question Interpretation

Some leaders questioned the U.S. interpretation of a key clause in Monday’s pact that called for fighting terrorism by “combining national measures with international cooperation.”

Reagan Administration officials defined national measures as “anything from economic sanctions to military strikes” and said the other nations “approved” of the March 15 U.S. bombing raids on Libya.

But Italian Prime Minister Bettino Craxi said any new U.S. attack on Libya involving Italian facilities “would violate terms of our agreement.”

And even Britain’s Margaret Thatcher, one of the strongest advocates of a tough statement on terrorism, said the resolution “does not amount to carte blanche” for further military action.