Belgium Says u.s 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.