FROM THE OFFICE OF PUBLIC AFFAIRS

• SECRETARY RUBIN: Good Morning. Welcome to the Treasury. Are we all set?

  MEMBER OF THE PRESS: We will be sure that we get the fox in the hen house.

  SECRETARY RUBIN: You go from conference to conference or press conference to press conference. Well, as you know, this weekend the Finance Ministers will -- the G-7 Finance Ministers will meet in Berlin. As you also know, President Clinton will be hosting the leader of G-7 in Denver in June.

  What we will be doing, in part, in Berlin is discussing the items on which we want to move forward in June. Let me make one point, if I may, about the G-7 process overall because at times people have raised the question of how important this process is in today's world. In my opinion, it is extremely important and you have heard me say that before.

  In 1995, after the Mexican crisis, we looked at Mexico and resolved that we were going to learn the lessons of Mexico to see what we could do to deal with these kinds of situations in a better fashion. Beginning at the Halifax Summit we began institutionalization of reforms that were designed to prevent similar crises in the future, to detect them earlier and to provide that more countries participate in dealing with crises when they did occur and when they had systemic significance. We have made great progress in these institutionalized reforms. In the meetings of the kind I will be attending in Berlin tomorrow and providing leadership in that movement toward reform with respect to the growing financial markets.

  Our agenda in Berlin will have three main objectives. First, we'll review the major challenges facing the world economy. The United States economy is performing well and there is strong growth in many emerging countries.

  Growth prospects in Japan and continental Europe are somewhat less clear at this point. In continental Europe the governments are addressing the challenges of strengthening growth, placing physical deficits on a sustainable path and implementing structural reforms to reduce unemployment.

  The United States has a critical interest in a strong dynamic Europe. We therefore, look forward to the discussions with the Europeans and their progress in meeting these challenges and their progress at moving toward monetary union along with the implications of the monetary union for the world economy.

  In Japan the main challenge is to maintain a supportive Macro-economic environment to meet Japan's commitment to strong domestic demand lead recovery. And to consolidate the gains made reducing external imbalances. Structural reform, deregulation and market openings are important to these objectives. Japan also faces a continuing challenge with respect to strengthening its financial system.

  As with Europe, the United States has a critical interest in a strong dynamic Japanese economy. Since in all likelihood one or more of you will probably ask about exchange markets, let me say the following: As we have said many times, a strong dollar is in the United States interest. We have had a strong dollar for some time now. Some G-7 countries have expressed concern about the recent declines in their currencies and we look forward to discussing these issues in Berlin.

  It is important to remember that ultimately exchange rates in all markets reflect fundamentals. So it is crucial to concentrate on the objectives of balanced growth and low inflation in all countries of the G-7.

  Outside the G-7 we expect to discuss progress toward reform in Russia and a number of other countries. The second main objective for these meetings, for the meeting tomorrow rather, is to continue our efforts to strengthen the world's financial markets. Building on the Halifax initiatives, we want to move forward on the priorities identified by the heads of State and Government Summit to improve the safeguards against systemic risk and address the challenges posed by innovation and capital market immigration.

  These priorities include enhancing cooperation and supervision of internationally active firms, improved trans- currency, encouraging stronger risk management and strong standards and supervisory structures in emerging countries. We will also be studying implications of sophisticated methods for electronic payment, electronic transfer value at the retail level.

  In Berlin, we will be reviewing progress in all these areas and we will explore the basis for more concrete discussions at the leader's meeting of G-7 in June.

  Third, we look at the issues related to reform to the National Financial Institutions. It is a reform designed to open markets and promote private sector solutions to development while employing public sector funds more effectively. We believe the national financial institutions are critically important to the economic and national security interests of the United States. But if we are going to continue to play the leadership role that we have had in these institutions it is absolutely imperative that we meet our commitments and to continue to participate funding of these institutions on an ongoing basis.

  The President addressed these institutions in the State of the Union address. He says that investing in these institutions and meeting our commitments would be an important priority to this administration. Secretary Albright and I look forward to discussing those very important priories with respect to these institutions and also the United Nation with Congress in the coming weeks.

  Let me close by saying that the G-7 meetings advance America's economic interests in two critical ways.

  One, by encouraging growth and development in the world economy, not just in the G-7, but also in developing the transitional countries. And by strengthening -- and two, by strengthening the international financial institutions to deal with the new challenges in the world economy.

  G-7 is finance ministers meetings are a forum in which we can speak to each other relatively informally, we being the finance ministers of the central bank governors, which then provides a framework of understanding to enable us to act when we see fit.

  By working together we can help promote the kinds of conditions in the global economy that will help foster good economic conditions for this country for years and decades to come.

  With that, I would be delighted to respond to any questions.

  MEMBER OF THE PRESS: Mr. Secretary, do you think that the general G-7 feeling on the dollar will be thus far and no further, or full steam ahead given the weakness in economic growth in both Europe and Japan?

  SECRETARY RUBIN: Well, as I said, we'll be having discussions tomorrow and we will see what their views are. Our view is that a strong dollar is in our interest and we have had a strong dollar for some time now. Yes, ma'am.

  MEMBER OF THE PRESS: James Baker said in an interview today that it is not as much of the level of the dollar that he is concerned with, but more about the stability. I am just wondering, are you concerned about the speed of the dollars recent rise in spite of that?

  SECRETARY RUBIN: I think I will stick with my statement.

  MEMBER OF THE PRESS: Can you tell us more about the expressions of concern from other G-7 members about currency levels; have those expressions been made directly to the U.S. Government, and has there been any specific requests attached to them?

  SECRETARY RUBIN: Well, let me just say that we have very good relations with the finance ministries around the world, the Treasury. So we have regular -- we have frequent discussions with people at these finance ministries about all kinds of things. In the course of those they'll discuss whatever is on their minds.

  MEMBER OF THE PRESS: But you are here in the States -- the same thing privately that we read in the press?

  SECRETARY RUBIN: Well, let me just -- I will stick with what I said. Now, I am going to be in Berlin tomorrow and we will be discussing a lot of things and one of which will be exchange rates.

  MEMBER OF THE PRESS: Mr. Secretary, aside from what the G-7 is looking to decide, is it your view, since as you now seem to be saying we've had a strong dollar for some time. Now that it has been just about a long enough time?

  SECRETARY RUBIN: What has been a long enough time?

  MEMBER OF THE PRESS: That we have had a strong dollar. In other words -- that it should not strengthen -- aside from what the G-7 view is like, is it your view that this is -- it is about strong enough given the fundamentals?

  SECRETARY RUBIN: I think that my statement speaks for itself.

  MEMBER OF THE PRESS: Mr. Secretary?

  SECRETARY RUBIN: Yes.

  MEMBER OF THE PRESS: Just a few questions. You said that you had expressions of concern from G-7 countries, so it is more than -- countries, is that correct? About decline in their currencies?

  SECRETARY RUBIN: I said, some G-7 countries have had some concerns about behavior of various currencies in the exchange markets. And we will be discussing that and --

  MEMBER OF THE PRESS: So it is more than one country? More than just Japan?

  SECRETARY RUBIN: I guess countries is plural so, okay.

  MEMBER OF THE PRESS: And you said that a strong dollar is in our interest and we have had a strong dollar.

  SECRETARY RUBIN: I said we have had a strong dollar for some time now.

  MEMBER OF THE PRESS: Some time.

  SECRETARY RUBIN: Some time now.

  (Laughter ensues.)

  MEMBER OF THE PRESS: Is it fair to infer that you are not dissatisfied with the fact that we have a strong dollar?

  SECRETARY RUBIN: We believe that we should have a strong dollar, and we have had a strong dollar for some time now.

  MEMBER OF THE PRESS: Mr. Secretary, you mentioned the outlook for the continental European --

  SECRETARY RUBIN: I think we should have a strong dollar. I think a strong dollar is in our interest as recently discussed. But I think -- I would also add, and I said this, that I think we have had a strong dollar for some time now.

  MEMBER OF THE PRESS: You mentioned that the outlook for some of the continental European economies was unclear at this point. Some people of whom say that the recent unemployment rate in Germany clears up a little bit of that, and it is sending some pretty strong signals about the German economy. What are your thoughts on that?

  SECRETARY RUBIN: Well, I very much look forward to meeting with Finance Minister Waigel and Mr. Tietmeyer Central Bank Governor Tietmeyer tomorrow and obviously one of the things we will be discussing is prospects in Germany. And I think I would really like to withhold comment until I have had a chance to talk to them and hear their thoughts on the subject. You say that the German unemployment number recorded this morning is relatively high. But having said that, I very much look for that in discussion tomorrow.

  MEMBER OF THE PRESS: You said that you were going to talk about Russia. What specifically do you think you will focus on and is there anything that is of particular concern?

  SECRETARY RUBIN: Well, we believe that it is imperative for Russia to remain on the reform track that we have worked with them -- that they have been on -- that we have worked with them on for quite some period of time now, anyhow I had anticipated working with them. And our discussions will center around Russia remaining on that reform track.

  MEMBER OF THE PRESS: Mr. Secretary, is the orderly dollar versa officially over now?

  SECRETARY RUBIN: I really would like to stick with what I said. We think about these things very carefully before we make them and I think it reflects very well our views on the current situation.

  MEMBER OF THE PRESS: I hate to keep hammering on this, but we will try and ask it a way that maybe you can answer. One of your acts here which you repeated here today, is that ultimately currency levels do reflect fundamentals?

  SECRETARY RUBIN: Right.

  MEMBER OF THE PRESS: Are we seeing a fairly accurate reflection of economic fundamentals among the G-7's based on current levels?

  SECRETARY RUBIN: I think we are -- the best thing for me to do is to really stick with my statement.

  MEMBER OF THE PRESS: A non-dollar question.

  SECRETARY RUBIN: I have to take dollar questions.

  (Laughter ensues.)

  MEMBER OF THE PRESS: Mr. Secretary, you mentioned that you were going to be discussing again the reforms necessary to deal with potential financial crises in international financial institutions. What are the areas that you see will need additional reform or additional measures taken that deal with those crises?

  SECRETARY RUBIN: One of the issues that we will be looking at here and also at the leader's meeting in June, will be the question of financial institutions in emerging countries. If you look at the emerging countries and you look at the kinds of economic difficulties in those countries, they very often are related to problems in developing in the financial systems.

  So in our view, what you need to have is a structured financial supervision and regulation that will tend to reduce the probability of those kinds of conditions occurring and that certainly is one of the areas that we are discussing.

  MEMBER OF THE PRESS: Mr. Secretary Rubin, you said that growth prospects in Japan are somewhat --

  SECRETARY RUBIN: Right.

  MEMBER OF THE PRESS: Would you recommend a fiscal stimulus package or --

  SECRETARY RUBIN: I don't want to get involved in specific recommendations for the Japanese Government. I don't that is appropriate. Nor is it our business really. But I do think that it is very important that we have a total macro- economic policy that is consistent with producing domestic demand to led growth and what the components of that are obviously -- is a matter for the Japanese Government to determine. But it is our view that it is in their interest and in the interest of the rest of the world that Japan is the second largest economy in the world. They have a strong economy and that economy would be lead by domestic demand. And that would then lead you to the question of an appropriate macro-economic policy for that purpose. What the components are need to be determined.

  MEMBER OF THE PRESS: Do you think that their current policy is going to constrain domestic demand?

  SECRETARY RUBIN: I guess there what I would say to that is that the growth prospects are as I said, and I stated are unclear. But we will obviously be hearing from them tomorrow on how they feel about it. But certainly prospects are unclear right now. And I think that we will have an interesting discussion on that subject.

  MEMBER OF THE PRESS: Is there any concern on your part that their trade surplus is going to start widening again, because you made a reference in your opening statement to the need to consolidate the needs to improvement that they have made on their external --

  SECRETARY RUBIN: I think that is one of the issues that we need to discuss and I am sure we will be discussing.

  MEMBER OF THE PRESS: Would you say that the discussion of foreign exchange rates is likely to take up more of your time when compared to previous meetings relatively speaking? I mean, some meetings it really hasn't been --

  SECRETARY RUBIN: I don't know. It is hard to tell. My guess is it will certainly be a principal topic of discussion but, there is a lot else that we need to talk about, even though it doesn't get much notice, the reform of the financial institutions is very important. The discussions we have on each of our countries monitoring fiscal reform policy is very important. But I am sure that exchange rate policy will also be discussed.

  MEMBER OF THE PRESS: So when you say, a principal, I mean, there have been times in the past that it has not been a principal topic of conversation?

  SECRETARY RUBIN: I would say it has taken more time. So, I don't know how much really. I really don't know.

  SENIOR TREASURY OFFICIAL: Why don't we do two or three more.

  MEMBER OF THE PRESS: You mentioned consolidated trade fronts in Japan.

  SECRETARY RUBIN: Yes, sir.

  MEMBER OF THE PRESS: Does that mean that you believe that Japan has made sufficient progress on reducing its surplus? I mean, they still have a big surplus worldwide and with us as well.

  SECRETARY RUBIN: No. I didn't mean to imply that. I think it is very important that Japan continue to work -- I think it is very much in Japan's interests to open its markets, that is in the interest of Japan and for the rest of the world, for that matter.

  MEMBER OF THE PRESS: But when you say, consolidate gains, it sort of implies that we feel that they have come far enough and --

  SECRETARY RUBIN: If that is the inference that you have drawn from it, I did not mean to imply that. But I did mean to imply that you don't want them to back track.

  MEMBER OF THE PRESS: Right. Right.

  MEMBER OF THE PRESS: What will you have to say to our trading partners regarding our economic and political situation right now in view of the President's budget proposal, the move on Capitol Hill towards a balanced budget amendment. What will you say to them is regarding those issues?

  SECRETARY RUBIN: I think that what I will say to them that we submitted our budget on Thursday. That I think that it is a strong budget. That we have had enormous accomplishment over the past four years, in terms of deficit reduction. That this would carry us the rest of the way. Whatever we may be going on in the rest of the atmosphere in Washington, that I think there is a lot of political desire by both parties on the Hill to put in place a balanced budget this year. And I think that there is a very good chance we will get it done.

  In terms of the balanced budget amendment, as you may know, I think it is a terrible, terrible idea. Since I can't seem to stop myself from saying that in no matter what context I am in, I may say it there. But that is not germane in our discussions here.

  MEMBER OF THE PRESS: And do you expect any criticism at all about U.S. trade decisions such as Helms-Burton. Do you expect any flack from that at all this time around?

  SECRETARY RUBIN: Well, I think we have been working our way through this in a very careful fashion. I don't think that that would be -- in this group, Finance Ministers, my guess is that that is going to be not much discussed.

  MEMBER OF THE PRESS: On the economic fundamentals in the various countries, is there anything we in the United States can do more to help stimulate the growth that you are looking for in Japan and Europe?

  SECRETARY RUBIN: If you go back ten years -- I wasn't here but I am giving you an impression, I think the discussions that took place -- I don't mean ten years, I meant eight years. I think the discussions that occurred, these kinds of meetings, the finance ministry meetings and if you go back seven or eight years people were saying, United States, your deficit is not only a problem for you but is a problem for the world and creates a kind of an atmosphere or a kind of an environment which does have an effect on -- or did have an effect on how people feel about our economy and what we do.

  And similarly as we talked about this issue that all of us with respect to our problems and to the nations with respect to their issues, I think it contributes to how each of us thinks about that issue and contributes to the focus on that issue.

  SENIOR TREASURY OFFICIAL: We'll do one more.

  SECRETARY RUBIN: Yes.

  MEMBER OF THE PRESS: What is your view about the progresses being made in Europe towards European monetary --

  SECRETARY RUBIN: Are their questions what?

  MEMBER OF THE PRESS: That are going to ask them about the latest developments?

  SECRETARY RUBIN: Yes. We are very interested in hearing how they feel with the various countries with respect to conversions and how they feel they are moving and what their progress is, I don't know anything specific but just to get a general sense from them of how they feel this whole process is moving on.

  MEMBER OF THE PRESS: I mean, like what do you feel about moving towards your objective without -- I mean, do you think they will achieve it?

  SECRETARY RUBIN: Do I think they will achieve it? I think their judgement would be far better than mine. And I think I would like to withhold comment on that until I get their sense of it.

  SENIOR TREASURY OFFICIAL: Thank you all, very much.