LAWSON SAYS LOUVRE CURRENCY ACCORD SATISFACTORY
The Louvre agreement by the Group of Seven
finance ministers and central bankers to stabilise currencies
has worked well and needs no fundamental strengthening at the
economic summit in Venice on June 8-10, U.K. Chancellor of the
Exchequer Nigel Lawson said.
    Previewing the summit, which he expected would not produce
any major new economic initiatives, Lawson told reporters work
remained to be done on improving the conditions for lasting
world economic growth.üside measures to boost growth, he said.

    "I think it is possible that there may be scope for a
further reduction in interest rates in Germany," he added, but
stressed that he had had no indication that such a move was
likely. He made no mention of Japanese interest rates.
    Lawson said the U.S. Should embark on "a gradual reduction
of its fiscal deficits over the next two or three years."
    He said the February 22 Louvre accord had produced
"satisfactory exchange rate stability," in part thanks to heavy
coordinated intervention of Group of Seven central banks, and
he was "content" with sterling's exchange rate.
    Pointing to the record 4.8 billion stg rise in U.K. May
currency reserves announced today he said, "we have been playing
a very full part ourselves ... We have been intervening to a
very much greater extent than we had done hitherto."
    Lawson said there was a risk that the Louvre agreement may
falter if member states did not implement the macro-economic
commitments underlying the accord.
    "Certainly it would be more difficult to maintain exchange
rate stability if countries are seen not to implement their
commitments in Paris ... In this respect." He said the U.S.
Budget deficit was "very important."
    Noting the 6,000 billion yen economic package announced by
Japanese Prime Minister Yasuhiro Nakasone last week Lawson
said, "what is really needed in Japan is an increase in
merchandise imports. Supply side measures are critical."
    "There is a specific range of consumer and agricultural
goods where they have an extremely restrictive regime which is
wholly unjustified," he said.
    Lawson doubted that Tokyo's partners would indulge in "Japan
bashing" at the summit especially after the economic stimulation
package and the announcement of Nakasone's plans to increase
Japanese development aid over the next three years.
    Japan's more flexible stance on Tokyo stock exchange
membership would also help deflect criticism, he said.
    He said he thought West Germany would instead come under
pressure at the summit to adopt similar stimulation measures to
jack up faltering economic growth.
    In this respect Lawson said he hoped Bonn would bring
forward to January 1988 part of its agreed package of tax cuts
scheduled for 1990. He also called on Bonn to push ahead with
the privatisation of German national industries.
    On debt, Lawson said he expected a three point British plan
to alleviate the burden of the poorest sub-saharan countries to
make progress in Venice.
    The plan, involving concessional rescheduling of sovereign
debt in the Paris Club, was first proposed at the IMF and World
Bank meetings in Washington earlier this year.
    Lawson said he would seek "to consolidate political backing
for the plan at the Venice summit" and hoped the programme would
be finalised at the Autumn meetings of the IMF and World Bank.
    He welcomed the recent moves by Citicorp and Chase
Manhattan to increase sharply their Third World debt
provisions.
    "First, it is a blow for realism. Second, because the market
response has shown that banks have much less to fear from this
sort of move than they felt before Citicorp," he said.
    U.K. Banks should follow Bank of England recommendations,
strengthening their balance sheets and making more provisions.
"They have done it to some extent, they need to do it more,"
Lawson said, adding it was up to the banks themselves to
determine the appropriate size of provisions.
    He also said the dismantling of farm subsidies would be
discussed at the summit. "There is a consensus, which we have to
push further."
 REUTER
