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U.S. Department of State

Great Seal Secretary of State Madeleine K. Albright and
Secretary of the Treasury Robert Rubin
Press Conference, Queen Elizabeth II Conference Center
London, United Kingdom, May 9, 1998
As released by the Office of the Spokesman
U.S. Department of State

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SECRETARY ALBRIGHT: I want to begin by thanking Prime Minister Blair, Foreign Minister Cook and the British government for their hospitality during the past week and for organizing very productive sessions that have just concluded. The United States participates in many international organizations and arrangements but the Group of Eight stands out because when our nations agree to act together for security, prosperity and development, for peace and human rights, we make a real difference around the globe.

Yesterday and today, Secretary Rubin and I have worked with our counterparts here to help keep the global economy healthy and meet challenges such as proliferation, crime and environmental catastrophe. We also discussed a number of regional issues where we are working to end conflicts and prevent future crisis. We stressed our concern about escalating violence on all sides in Kosovo. Instead of seizing the opportunity offered by the Contact Group six weeks ago for dialogue with the Kosovar Albanians, Belgrade has built up its special police presence and introduced Serb forces into Kosovo, a source of great concern there and throughout the Balkans. Armed Kosovar extremists have recently stepped up attacks. In response, six of the G-8 nations have today declared a ban on investment in Serbia. The same states are also moving to implement a freeze on the countryís financial assets. I understand that the EU and other countries are considering joining these bans and I encourage them to do so. The Russian Federation has chosen not to associate itself with these measures, and I regret that, but I want to stress that these measures will significantly hamper Belgradeís ability to fund its repressive policies and I would underline the agreement among all eight governments that the situation in Kosovo is unacceptable and untenable. We do not support independence for Kosovo and we condemn the use of force by either side. We all agree that a lasting solution must include enhanced status and autonomy for Kosovo reached through negotiations.

We are committed to work together to sustain peace and stability in the Balkans and we will not allow the tremendous progress that has been achieved in Bosnia to be halted or reversed by the actions of extremists in or outside the country. Our nations have renewed our pledge to do everything we can to speed the pace of minority returns across Bosnia and to support those local authorities who assist the process rather than obstruct it.

We welcome signs that Iran is shifting to a more open and less confrontational approach to the world and we will continue to look for progress in this direction. We also discussed our concerns about the political and economic situation in Indonesia extensively. We reiterated our commitment to support the reforms agreed by Indonesia and the IMF and the need for all sides to refrain from violence. The United States will watch the situation closely and continue to urge the government to observe human rights norms as part of the process of rebuilding public and international confidence. The G-8 plays an essential leadership role in strengthening international standards in many areas. Let me mention three. First, we fight terrorism and crime and promote arms control and non-proliferation. This year, our priority, as President Clinton has urged, will be strengthening the biological and toxic weapons convention so that countries tempted to develop those noxious devices know they can expect to be detected and stopped. Second, we act together to promote democracy and good governance and to support nations as they reform. We have agreed here to work to strengthen the basic worker rights recognized by the ILO and focus special attention on the rights of children and other vulnerable groups. Third, we have a responsibility to be leaders for environmental protection. This week, we have adopted an unprecedented G-8 action plan on forests to promote conservation and sustainable management of that valuable resource, and weíre undertaking new cooperation to protect our oceans and preserve our freshwater resources. We made important progress towards a G-8 strategy to combat climate change, achieve significant commitments from developing countries and promote efficient market-based mechanisms to clean our air and help our economies grow. Our diverse discussions have shared one underlying theme: our common responsibility to help nations build an international community around basic principles of democracy, open markets and sustainable development, the rule of law and a commitment to peace. The steps we have agreed to take here today and those that our leaders will take when they meet next week will bring us closer to that goal and work to the benefit of all our peoples.

SECRETARY RUBIN: As Secretary Albright said, we had very useful meetings today as we set the framework for the meeting of the leaders in Birmingham next week. These discussions took place at a critical time in the global economy when there are enormous opportunities, but also new risks, all of which need to be managed effectively for the benefit of all of our people. Let me say a few words about the finance ministersí meetings yesterday and then today and then Secretary Albright and I would be happy to respond to questions. The principal focus in respect of the finance ministersí meetings was Asia, both the current situation and also the implications of the situation in Asia with regard to financial architecture. At yesterdayís meeting, we started by discussing the G-7 economies. There the focus is principally on Europe and Japan. With respect to Japan, we welcome the April 25 announcement with regard to the substantial stimulus package. Minister Matsunaga stressed the commitment of the Japanese government to rapid implementation of that package and also discussed with us the plans with respect to strengthening the financial sector, which is obviously critical with regard to restoration of strong domestic demand-led growth, in Japan, which in turn in critically important to Japan, Asia and the rest of the world. On EMU, we had a very interesting discussion. It was focused particularly, I would say, on the need for structural reforms to accompany the development of the EMU. As to the United States, we stated our view, which is to look forward to a successful EMU, which we believe is very much in the interest of Europe, the United States and the rest of the world. With respect to Asia, we noted that many of the countries with financial instability have begun the restoration of stability. At the same time, we emphasized that there are enormous challenges ahead for all these countries and that this process will take time. With respect to Indonesia, we welcomed the IMF program and the steps that have been taken with respect to implementing that program, but we also expressed concerned about social unrest in Indonesia and stressed the importance of the Indonesian authorities exercising restraint. We all agreed on the critical role of the IMF and the critical importance of all of our nations meeting our commitments with respect to the funding of the IMF. We continued our discussion with respect to global architecture and we discussed a report that will be submitted to the Heads for use at their meetings next week. That report reflects the framework and priorities that various of us, including the United States Government, have discussed at various meetings. As you know, these are very complex issues and will undoubtedly take substantial time to fully resolve, both intellectually and then in terms of getting consensus from the international community. There was good agreement, I would say almost total agreement, amongst the G-7 finance ministers with respect to the fundamental framework with the focus particularly on transparency, on financial sectors, on improved surveillance of regulators within the developing nations, for that matter all nations of the world, and then the importance of the private sector for fully bearing the consequences of its actions. At this morningís meeting, when the G-7 then became the G-8, we discussed employability, various issues with respect to equipping our populations to be productive and competitive in the global economy, including tax incentives, education and training. On the joint meeting between the finance ministers and the foreign ministers which, I must say, seemed to me, and I know Secretary Albright feels very much the same way, a very successful meeting, we discussed a wide range of issues, including the integration of economic, political and social objectives with respect to restoring solid and sustainable growth in the countries that have had financial instabi

QUESTION: Hi, Iím Tom Reid with the Washington Post. We just heard Gordon Brown talking really passionately about debt reduction. He said he thought it was the most important thing that the finance ministers will carry forward to Birmingham. He thought it was crucial that something important, substantial he said, be done by two years and you didnít even mention it. I wonder if you feel as strongly about this as he does.

SECRETARY RUBIN: Yes. The United States was a leading advocate and architect of the (inaudible) Program and we feel very strongly about that program. We also feel very strongly that debt reduction needs to be integrally related to reform, otherwise it will not be effective in serving the purposes that it needs to serve. And we feel very strongly that international finance institutions should provide interim relief before the full six-year-or-less period to final debt relief is accomplished.

SECRETARY ALBRIGHT: Secretary Rubin spoke very passionately about this during the meetings.

QUESTION: Mrs. Albright, what would be the situation in case the Israeli Prime Minister is insisting or refusing to go to Washington and accepting the American proposals?

SECRETARY ALBRIGHT: Well, let me say that I have been in very close touch with Dennis Ross, who is in the region, and there is work going on. Ambassador Ross is going to be seeing Prime Minister Netanyahu tonight. I think that when Prime Minister Netanyahu left here, I was very encouraged by his constructive ideas and willingness to work a solution to the issue so that we could, in fact, have a meeting in Washington. So you have asked a hypothetical question and I am hopeful and I think that we will have to wait to see how this proceeds. There is a Cabinet meeting tomorrow in Jerusalem and we will see at that point.

QUESTION: Madam Secretary, if I could ask you, can you confirm that Bob Gelbard and Dick Holbrooke are going to go to Belgrade to talk to President Milosevic and can you also describe, is there a distinction that makes any difference to have an investment ban only on Serbia and not on the former Republic of Yugoslavia? Why was that done, why was that distinction made?

SECRETARY ALBRIGHT: First of all, I can confirm that Ambassador Gelbard and Mr. Holbrooke have gone to Belgrade. They are going to try to follow through on what the Contact Group has been asking for at its various meetings since we met in London the first time and that is a dialogue, without preconditions, between Belgrade and Pristina. They are going to try to explain to President Milosevic the fact that the international community wants to see this dialogue take place and have there be a political solution to this. That is our desire and, as I stated in my opening remarks, we think that it is important to have an enhanced status for Kosovo and those discussions need to take place. I think that, in terms of the ban, the point here is that Montenegro has elected a president who, we believe, is taking the right steps and I think that what we are trying to do is to put the pressure where it is deserved.

QUESTION: I have a question for each one of you if I can do that. Secretary Rubin, you stated that you would advise the President to veto the current Financial Services Reform Bill in its present form. Would that be so that it could include the Basel Capital Accord principles and allow financial conglomerates in America?

SECRETARY RUBIN: We are a strong proponent of financial modernization and we introduced legislation about a year ago toward that end. The legislation that is current, at least the legislation that looks like it will be coming forward in the House of Representatives, has additional restrictions that we think are inappropriate and we think will interfere with the effective policy functions in direct administration with respect to economic management, particularly the prohibition against conducting non-bank activities and subsidiaries, and it was on that that we have focused and on which I would be focused in recommending a veto. But we are strong proponents of financial modernization and we think both restrictions with respect to subsidiaries serve no safety and soundness function and they do not involve any competitive advantage.

QUESTION: Would the Basel Capital Accord, the principles being adopted, would they have to go through the Senate or would that just be a matter of adaptation at the Federal Reserve level?

SECRETARY RUBIN: An adaptation of the BIS standards would not require Congressional approval.

QUESTION: Madame, Mrs. Albright, last year you stated at the G-7 or G-8, whatever, in Denver that the foreign ministers discussed how you could work together on a daily basis. Could you comment on the progress which has been made in this area and the kinds of partnerships you are forming?

SECRETARY ALBRIGHT: Let me say that there is no doubt about the fact that we operate together very frequently in terms of dealing with the kinds of issues that are in our communique. I think that the communique represents kind of our daily bread, and we have discussions, either we meet in different places in sub-groups. The thing that I have discovered is that foreign ministers meet a lot, and so we are able to stay in touch, and I would say, to give credit to Foreign Secretary Cook: he is a terrific Chairman and I think that our meeting went, if I can say, much more smoothly than the one that I chaired in Denver and part of it, I think, has to do with the fact that there are really has been a lot of contact among us all and that we are developing a very close working relationship in terms of all those issues.

QUESTION: Reuters. Secretary Rubin, you mentioned the situation in Indonesia and that thereís growing concern about the political situation there. How concerned are you really about the political reform process; has there been any talk of possible sanctions or any other measures to force Suharto on that road; and in that respect, why is it that the U.S. hasnít released its part of the bilateral funds that have been agreed upon?

SECRETARY RUBIN: Why donít we both respond to that. Iíll start out this, since you addressed it to me, but then I think that Secretary Albright ought to respond, would probably like to respond, as well. With respect to Indonesia, our basic view is that there are serious issues with respect to human rights and other matters that are being addressed in various ways and particularly by the State Department. At the same time, there is the issue of financial instability, which is enormously important to the 200 million people of Indonesia, especially the poorest, and it also very much affects the economic well-being of the other nations of Asia and, for that matter, the United States. Our judgment is that the right path is to implement what is a good and sound and strong IMF program and that, as I said in my remarks, Indonesia has taken steps toward doing, but there is a great deal of work ahead and many challenges ahead. With respect to social and political considerations, that clearly is also very relevant to re-establishing financial stability, as I said a moment ago, by various other means. We have been discussing those matters, have discussed those matters at various times with the Indonesian government. There is no thought of sanctions, and what was your last issue? Oh, the second line of defense. That is not an issue at the moment. We donít even have our view worked out yet with Indonesia, so that is not a current issue.

SECRETARY ALBRIGHT: Let me say that obviously we are very concerned about what is going on in Indonesia and have, as I said in my statement, basically warned about the necessity of abiding by human rights, and we believe that there ought to be peaceful demonstrations allowed. We think that the situation is one that is problematic -- we have warned about it. In terms of assistance, I would like to say that we have programs totaling nearly 600 million dollars for Indonesia, which are basically related to trying to alleviate the social problems that Secretary Rubin mentioned. We have given 45 million dollars in development assistance, 50 million dollars in food supplies and 400 million in agriculture export credit guarantees, and the Ex-Im Bank has also offered to provide short-term financing for up to a billion dollars and those loan guarantees were announced yesterday, I guess. So, I think that we are trying in a variety of ways, one, to warn Indonesia, two, to support the IMF, and three, to do what we can in terms of alleviating some of the social problems that are being created.

QUESTION: Madam Albright, Neil Harrison, APTV. I just wanted to return to the subject of Benjamin Netanyahu not going to Washington on Monday. Do you see that as a hardening of the Israeli position and are you personally disappointed that heís not going to be going there?

SECRETARY ALBRIGHT: First of all, I have not yet taken no for an answer. I think that this is a situation that is dynamic and there is an awful lot of work that is going on. When Prime Minister Netanyahu left here, I think we felt, all of us, that there was hope. I continue to have that hope and, as I said, Ambassador Ross is still there. I think we need to keep concentrating on what we are doing. Obviously, it is a very important for there to be consideration of the ideas that we have proposed, and we would hope that there would be acceptance of our conditioned invitation to Washington because what we are trying to do here, is to get to the accelerated permanent status talks. We believe that it is important to move in that direction, at the same time, to fulfill some of the interim agreement obligations, and this has been a policy that we have been working on for many months and thousands of hours of negotiation, and I think that we need to pursue it to a logical conclusion and, as I said, I am not without hope.

QUESTION: Secretary Rubin, two questions about Asia. Craig Hines with the Houston Chronicle. If there had been all of this transparency in place, would there have been the Asian monetary crisis and, number two, what does it mean to the private sector - this warning that there are no more bail- outs? What exactly does that mean?

SECRETARY RUBIN: I think that if there had been greater transparency and, if, for example, there had been transparency with respect to forward positions against reserves in the central banks, so the private sector creditors and investors had realized that those situations, those reserved positions, were a lot less substantial than they seemed to be, I think that you could easily have seen smaller flows of capital and that would have diminished the magnitude of the problem once it occurred. So I think that transparency is very important; it is also very important that investors and creditors make use of the information and engage in vigorous risk analysis, and I think that there was a real paucity of that in many cases with respect to the Asian situation. On the second piece, the IMF has, and in our judgment will continue to have, a critical role to play with respect to crisis, but what we are saying is that has to be combined with the private sector much more fully bearing the consequences of its actions, and I think in the Korean banking situation, the creditor banks in Korea, you saw a first step in that direction.

QUESTION: Secretary Rubin, I am Nick Bray from the Wall Street Journal. I would like to follow that question up by asking you what exactly do you expect to emerge in this new global financial architecture, and what effect will the Euro, the arrival of the Euro, have in changing perhaps the global financial scene?

SECRETARY RUBIN: Let me on the first question defer that. The Heads are going to be receiving a report from the finance ministers some time this week, and they are going to be discussing that and I know that that is something they intend to address at the end of their meeting. Let me say that we have said on a number of occasions that this issue of the private sector fully bearing the consequence of their actions is a very, very complex issue, and we have also said publicly on a number of occasions that we have been looking at things like the IMF lending into arrears. We have been looking at the possibility of provisions in trust indentures and in debt agreements that would provide for debtor-creditor negotiations and other matters, but that is something that the heads will be discussing and then we will discuss more fully. In terms of the EMU, the EMU can contribute substantially to economic growth and well-being in Europe, and it can make the common market activity more efficient. Secondly, I think it does provide a real impetus towards structural reform and in dealing with other kinds of issues that are so essential to European growth and strength. Whatís good for Europe is good for the United States, so, as I said before, we welcome the EMU and we certainly look forward to it being successful.

QUESTION: Susan Cornwell with Reuters. Madam Secretary, you said that you regretted the fact that the Russians did not join the new sanctions against Yugoslavia. Was there any argument on this point or even discussion during your meetings here with the Russians, and do you think their stance on this hinders, weakens or even hinders what you are trying to accomplish in Kosovo?

SECRETARY ALBRIGHT: Obviously, there was discussion on it as there has been at previous meetings. Their stance on it, they believe that President Milosevic reacts, that he reacts better without these kinds of sanctions. We believe that he is subject to pressure and that it is essential to exert that kind of pressure. What I did find very interesting and very important, and I mentioned in my remarks, is that there was no disagreement about the seriousness of the situation and the danger of what was going on in Kosovo destabilizing the region and the fact that it was essential to have this unconditioned dialogue that violence was unacceptable and that a political solution was the best way to go and that President Milosevic should in fact welcome the possibility of an international presence, a mediator of some kind, a facilitator for such a political talks.

QUESTION: Edith Lederer from Associated Press. Coming in to this meeting there seemed to be a lot of skepticism and concern about Japan, not only about, primarily, its own economy and then what role it was going to play in the Asian recovery. I would like to know whether, after your discussions, you come away feeling that there is still this skepticism that Japan is going to be able to act as the motor for Asian economic recovery or whether there are still serious problems?

SECRETARY RUBIN: Let me disagree a little bit with the premise of the question. I donít think that I would characterize or use the word skepticism. I donít think that I would agree with that characterization. I think that there has been the recognition that Japan has had very little growth and that Japan is, by multiples, the largest economy in Asia, so that Japan growing at a healthy rate, led by domestic demand, is very important not only for Japan but for the rest of Asia. Prime Minister Hashimoto has taken politically difficult steps in announcing a substantial stimulus program and, in addition, there has been broad-base recognition throughout the financial community, and by Japan itself, that it needs to deal with its financial system, with deregulation, and much of the financial community would also have to decide to focus on opening markets. Those, on the one hand, all are substantial challenges and, on the other hand, Japan is probably the most remarkable economic success story of the last 50 years, and we all look forward to Japan meeting its challenges and getting back on the track it needs to be on for its own sake and the sake of the rest of the world.

SECRETARY ALBRIGHT: Let me also add to that. It was very evident from these meetings, as well as from my trip to Japan, which took place 5 days ago, that Japan has a very important role to play, whether it is within the G-8 context, or regionally, or as one of Americaís staunchest friends and allies, and that it is a very important relationship to us, and that their ability, as Secretary Rubin stated, to rise to this challenge is very important, and they clearly play a crucial role. I do think also, just the way that we are able, Secretary Rubin and I, to answer these questions together, is very symptomatic of what this meeting was about here at this time, and I hope that that is something that is really noted. Secretary Rubin mentioned it in his remarks: the combination of having finance ministers and foreign ministers meet together, I think, is quite novel and also shows an entirely new way of dealing with the challenges as we move into the 21st century. The subjects we discussed in terms of the environmental issues and the fact that we see a lot of the foreign policy and economic policy issues as being a part of a whole, I think was more evident than I have ever seen. We certainly do it in Washington, but it is interesting to see this movement of our meetings together, and I think that it was very successful, and just answering that question, I think, is an example of how looking at problems from the angles of the finance ministers, as well as the foreign ministers, is especially useful as we look at our various relationships.

[End of Document]

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