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IMF MANAGING DIRECTOR ISSUES STATEMENT AT CONCLUSION OF MONETARY NEGOTIATIONS IN BRUSSELS

 WASHINGTON, Aug. 2 /PRNewswire/ -- The managing director of the International Monetary Fund, Michel Camdessus, who has been closely informed of the monetary negotiations in Brussels, has issued the following statement at their conclusion:
 The exchange market tensions of recent months have reflected the market perception that there were deep divergences in the policy requirements of member states.
 In the present state of recession in the European economies, it is desirable, on the one hand, that those countries whose success in the fight against inflation places them in a position to do so should be able to proceed with a significant reduction in their interest rates. It is understandable, on the other hand, that the German monetary authorities, faced with the extraordinary circumstances associated with reunification, judge that the time for a similar reduction has not yet come for their country.
 In these exceptional circumstances, it would have been contrary to the spirit of European cooperation to delay the reductions in interest rates that are in order, out of concern for the possible repercussions on the exchange rates of the ERM. It is therefore appropriate that the countries in which the economic fundamentals are sound and inflation is well under control proceed with the interest rate moves warranted by their economic situation. Prudently managed, this diversified strategy should make it possible to hasten the indispensable resumption of growth and reduction in unemployment.
 The temporary widening of the intervention margins within the ERM should contribute to the reconciliation of economic policy requirements. The risks of a relaxation of discipline entailed in a widening of such a magnitude are, nevertheless, serious. It is thus urgent to facilitate the return of the system to normal functioning and the resumption of progress towards European monetary union. This can only be assured if these exceptional arrangements in fact last no more than a short time, and for this that:
 -- Germany accelerate its progress towards fiscal consolidation and price stability;
 -- those of its partners in a position to follow a policy of reductions in interest rates consolidate at the same time their gains in the fight against inflation;
 -- and finally, monetary policy coordination is quickly reinforced and raised to the level required under Phase II of the Maastricht Treaty.
 In the exercise of its multilateral surveillance responsibilities, the International Monetary Fund will follow closely developments in coming weeks and will convey to the member states of the Community such views and recommendations as are appropriate. It is essential that remaining fundamentally aimed at economic convergence and the control of inflation, the EMS may continue to play its part towards a better functioning of the international monetary system.
 -0- 8/2/93
 /CONTACT: International Monetary Fund, External Relations Department, 202-623-7100/


CO: International Monetary Fund ST: District of Columbia IN: FIN SU:

MH-DS -- DC004 -- 8175 08/02/93 08:39 EDT
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Date:Aug 2, 1993
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