A Prescription For Recovery?

A 22-nation group seeking to prevent future global currency crises urged greater openness by all countries, tougher banking regulations, and consideration of making investors pay for their own mistakes.

The recommendations of the U.S.-convened group were included in three separate reports.

International markets continued a broad decline Monday, which was widely attributed to inaction by the seven leading industrial nations to head off the crisis over the weekend.

"The international financial crisis that began in Asia and has now spread to other continents lends urgency to efforts to strengthen the architecture of the international financial system," the 22-nation working group said in seeking rapid implementation of their proposals.

The working group focused on reforms in the areas of banking regulation, greater openness in disclosure of economic data by countries, and ways to prevent future crises by insuring that the private sector faces greater risks of suffering losses.

The proposals are likely to provide the basis for a variety of reforms being considered by the 182-nation International Monetary Fund (IMF), which is holding its annual meetings this week in Washington.

"These will be discussed by the IMF. They have all the tools for carrying forward this process," said Italian Deputy Finance Minister Mario Draghi, co-chairman of the study group on financial sector reform.

The lengthy reports, which were formulated over the past four months, were part of a blur of activity this week centered around the IMF meetings as the United States and other major powers sought to exert leadership in an effort to calm jittery financial markets.

The policy-making body of the IMF said Sunday night that the global economic outlook has "worsened considerably," but its discussions gave no clear sign that members had resolved disagreements over how to halt the crisis.

Referring to recessions in Japan and many other Asian nations, the leveling of the Russian economy and stock market turmoil, the IMF panel said: "The outlook for the world economy has worsened considerably since the committee's April meeting."

In further evidence of the crisis, top Japanese bankers told U.S. officials at a meeting Saturday that Japan's largest 19 banks are in far worse condition than ever acknowledged, The New York Times reported Monday.

In Russia, top economic policymaker Yuri Maslyukov criticized the IMF Monday, and said the body shared the blame for the country's major financial crisis.

"We did not just fall into this pit by ourselves. It was also thanks to our 'skillful' partners in the International Monetary Fund," Maslyukov said before demanding help from international creditors.

The United States and other nations in recent weeks have put forward major proposals to overhaul the IMF, which has been widely criticized for mishandling the Asian and Russian cises. However, the interim committee's statement underlined how much disagreement remains over what to do. None of the major measures was adopted, although the group pledged to continue working on a coordinated strategy.

"Now is the time to follow up with concrete and rapid action," the statement said, although it indicated many of the proposals would not be acted on until next spring's IMF meeting.

U.S. officials said they were happy with the initial support they have received for a major proposal President Clinton made Friday that would accelerate emergency IMF loans to countries threatened with investor panic.

In its statement, the IMF committee said it would "explore" such an approach, but it stressed that the fund's reserves, depleted by billion-dollar rescue packages for Asia and Russia, need to be replenished.

Several nations, including Britain and Japan, said agreement on the U.S. initiative depended on congressional approval of an $18 billion American contribution before lawmakers go home this month.

Playing down these disagreements, the administration pressed ahead with assembling a multibillion-dollar bailout plan for Brazil, the latest country threatened by financial crisis.

It was expected that a package of perhaps $30 billion in an emergency credit line for Brazil could be announced soon now that Brazilian President Fernando Henrique Cardoso has won an unprecedented second four-year term in Sunday's election.

©1998 CBS Worldwide Corp. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press and Reuters contributed to this report