FROM THE OFFICE OF PUBLIC AFFAIRS

This weekend, I will travel to Bonn, Germany to meet with the Finance Ministers and Central Bank Governors of the G-7. We will focus on two basic challenges: promoting growth in the global economy, and continuing the effort to reform the international financial architecture for the 21st century.

We face a number of challenges in promoting growth and recovery in the global economy. With respect to the industrialized nations, while the most likely scenario for the United States remains solid growth and low inflation, subject to the usual ups and downs and the risks of the global economy, we continue to believe that the balance of risks in the global economy has shifted, and that highlights the importance of sound, growth-oriented policies in all of the G-7 countries. I am sure we will be discussing how Japan and Europe plan to move forward on growth in their economies. This is critical to the prospects for recovery in the emerging economies.

It is also important because the international system cannot sustain indefinitely the large current account imbalances created by the disparities in growth and openness between the U.S. and its major trading partners.

We will also review the major challenges facing the emerging market economies and how we can work to restore stability and growth. Many crisis and non-crisis countries have made real progress in reform, and that has had positive effects as in Korea and Thailand and in many non-crisis countries. Much work, however, remains ahead in all countries. We will discuss Brazil's progress toward putting in place the strong economic program necessary to restore confidence, contain inflation and address its fiscal problems. We will also discuss Russia.

The second major focus for this weekend will be the global financial architecture. Our approach is based on sustaining and reinforcing a market-based system for the global economy that will be less susceptible to major instability and that will better deal with major instability when it occurs.

Many of these issues are extremely complex, but an enormous amount of work has been done and progress is being made in many areas. Development of final measures, including analysis and international consensus, will phase in over time in some cases quite extensive time given the complexities of dealing with this new global economy. At this meeting I expect we will be in a position to highlight progress we have made in two important areas.

First, we expect to reach agreement on improvements to the IMF's Special Data Dissemination Standard that will significantly strengthen countries' reporting of their reserves and related liabilities, key data for market assessment of a country's financial position. Had these kinds of requirements been in place before the current crisis began in 1997, the flows of capital might well have slowed at a much earlier stage, substantially reducing the severity of the crisis.

Second, Bundesbank President Tietmeyer has been working on a proposal to establish a Financial Stability Forum to improve policy coordination among national financial authorities, the international financial institutions and international regulatory bodies. We look forward to discussions this weekend on an approach we can all endorse.

For the United States, an important goal of this meeting is to continue to advance the discussion in a broad range of other areas where the thinking and in some cases practice have continued to develop in the months leading up to the Cologne Summit in June. This is all in accordance with the full framework set forth in the October 30 statements of the Leaders and of the Finance Ministers and Central Bank Governors. In that context, to continue the international inclusiveness in the architecture work that began with the Special Meeting of Finance Ministers and Central Bank Governors from a number of countries a year ago, we expect to reach agreement in Bonn to conduct two key meetings over the next few months for a broad range of industrial and emerging economies. Germany would host the first meeting in mid-March, and we would host the second in the U.S. in April.

Let me conclude by emphasizing how important the G-7 process is in dealing with current economic challenges and issues and to these efforts to strengthen the international financial system. We look forward to working with our German colleagues as host of this meeting and this year's summit and with the other G-7 countries, both on the immediate issues and in on the architecture.