EYSKENS SAYS US PRIME RISES WILL AID CURRENCIES
Belgian Finance Minister Mark Eyskens
warmly welcomed this week's increase in U.S. Prime rates,
calling it a move that went beyond the Group of Five and Canada
Paris accord on stabilising currencies.
    The rate rise would underpin economic and financial policy
convergence among major countries, he added.
    In an interview with Reuters, Eyskens also made clear he
believed the countries involved in the accord - the U.S.,
Japan, West Germany, France, Britain and Canada - had agreed
"tentative" fluctuation ranges for exchange rates.
    Eyskens was speaking before hosting an informal meeting of
European Community finance ministers and central bank chiefs in
Belgium this weekend focusing on the international monetary
situation and proposals for strengthening the European Monetary
System (EMS).
    Asked about the dollar's recent fall on currency markets,
Eyskens said he believed the Paris agreement was proving "more
or less workable" despite what he called evident disagreements
over U.S. Economic and monetary policy between Treasury
Secretary James Baker and Federal Reserve Chairman Paul
Volcker.
    Besides Baker's public statements that had dramatically
influenced exchange markets, trade tensions between the U.S.And
Japan had also caused the dollar's fall, expecially against the
yen, he said.
    But he expressed optimism that Washington and Tokyo could
reach a compromise in their row over semi-conductor trade. "I
think agreement is quite possible," he said.
     Eyskens said he was "very agreeably surprised" by this
week's quarter-point increase in U.S. Prime rates despite the
obvious negative consequences for debtor countries.
    "It is a positive element which goes further than the
(Paris) Louvre agreement ...It is the market taking account of
its content," he said.
    He added that coordination of interest rates was a
fundamental element of economic and monetary convergence
between leading industrialised economies.
    "A policy of maintaining exchange rates within fluctuation
ranges is not possible if it is not accompanied at least by a
more coordinated policy of interest rates," he said.
    Eyskens made clear he believed the G-6 countries had agreed
in Paris on ranges in which to hold their currencies.
    He said the end of the February 22 Louvre accord, in which
the partners agreed to cooperate closely to foster exchange
rate stability around current levels, clearly alluded to a
"system of tentative (fluctuation) margins."
    He added the meeting and the statement would have been
meaningless if the G-6 had not discussed the technicalities of
implementing it.
    Eyskens said there was growing economic convergence among
leading industrialised countries pointing towards greater order
in the international monetary system.
    "That doesn't mean we are ready to restore Bretton Woods
(the post-World War Two system of fixed exchange rates), but
within the (International Monetary Fund) Interim Committee we
are thinking in terms of target zones, fluctuation ranges to be
implemented and defended," he said.
    The Interim Committee meets next week in Washington ahead
of the IMF's Spring meetings, and Eyskens said the EC ministers
would prepare for the gatherings at this weekend's talks.
    He said he hoped for wide-ranging talks on the future of
the EMS at the weekend meeting, based on proposals from the
EC's Monetary Committee and Committee of Central Bank Governors
for strengthening the system through technical and
institutional changes.
    Eyskens said he expected EC Commission President Jacques
Delors to submit proposals for fully liberalising capital
movements within the 12-nation bloc and made clear he shared
Delors' view that this must be accompanied by a reinforcement
of the EMS. "Both are totally linked. Liberalisation without
strengthening the EMS would destabilise the Community," he said.
 REUTER
