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Clinton Urges Aid in World-Wide 'Financial Emergency'

By John F. Harris
The Washington Post

President Clinton gave his most alarming assessment to date of the faltering world economy Monday as he outlined a set of growth-oriented actions he said the United States must take with other economic powers to meet "the biggest financial challenge facing the world in a half-century."

The noontime speech at the Council on Foreign Relations here was Clinton's most comprehensive statement so far on the financial turmoil that began in Asia more than a year ago and in recent months has infected economies in Latin America and Russia.

What Clinton last November called a "few little glitches on the road," he Monday labeled a "financial emergency" that could imperil prosperity at home and invite massive social unrest overseas.

In response, Clinton proposed a list of ideas - including new policies to help Asian businesses with their debt - that would reflect what he called a fundamental shift in focus by the United States and other economic powers.

Clinton's speech was widely interpreted by financial analysts as hinting at the need for the Federal Reserve Board and other central banks to tilt toward lower interest rates.

While the fight against global inflation has dominated policy for three decades, the president said the new imperative is to stimulate growth in developed and emerging economies alike.

"Clearly the balance of risks has now shifted, with a full quarter of the world's population living in countries with declining economic growth or negative economic growth," Clinton said. "Therefore, I believe the industrial world's chief priority today, plainly, is to spur growth."

Significantly, the finance ministers and central bank governors of the Group of Seven leading industrial powers issued a joint statement within an hour of Clinton's speech in which they agreed that "inflation is low or falling in many parts of the world" and pledged coordination among themselves "to preserve or create conditions for sustainable domestic growth and financial stability in their own economies."

Federal Reserve Chairman Alan Greenspan, a signatory of the statement, has in recent days signaled a new willingness to consider lowering interest rates to spur growth. The administration has refrained from pressuring the independent Federal Reserve, and Treasury Secretary Robert E. Rubin denied that Clinton's remarks were intended to do so.

Clinton devoted a major portion of the speech to Russia, where President Boris Yeltsin is battling economic disarray and was forced by the parliament to accept a new prime minister, Yevgeny Primakov. Saying that he and Yeltsin "face one of the great challenges of their time," Clinton pledged support from the United States and other Western powers if Russia will "take decisive steps to stabilize the economy and restore investor confidence."

The White House had been planning a major economic speech here for at least two weeks, but the context became more challenging, and more urgent, for Clinton in recent days following the release of independent counsel Kenneth W. Starr's report on the Monica S. Lewinsky controversy. With talk of impeachment swirling in Washington, Clinton needed to demonstrate to Capitol Hill and world financial markets that he is not so absorbed by a crisis of personal and political survival that he cannot confront a crisis of policy.

On Labor Day, Clinton summoned his economic and national security teams for an unscheduled, two-hour meeting on the economy in the White House residence, said National Economic Director Gene Sperling, who said he and speechwriter Michael Waldman met again with Clinton in the Oval Office at 11 p.m. Sunday to revise the text.

Even before Clinton delivered his speech, Wall Street was marking robust gains. The Dow Jones Industrial Average was up by 200 points Monday morning, and finished the day 149 points up.

He called for a combined meeting of the finance ministers and central bankers of the G-7 industrialized nations next month to talk about how to make the world financial system less crisis-prone. These people already were scheduled to be in Washington for an annual joint meeting of the World Bank and the IMF.

Clinton said he was asking the World Bank to shift its resources to double its support for the "social safety net" in Asia and the IMF to use $15 billion in emergency funds, with a special focus on helping Latin American economies "buffeted by economic storms outside their control."

The president also used his speech to lash out at House members for failing to follow the Senate in approving $18 billion to meet U.S. obligations to the IMF, warning that American workers, farmers and businesses would pay the price of continued economic turmoil overseas.

Later in the day, Clinton suggested that what the world needs is a global version of the regulatory and social welfare programs that have evolved in the United States in the 60 years since the New Deal.