FROM THE OFFICE OF PUBLIC AFFAIRS

We can at these meetings take some satisfaction from the fact that conditions in global markets are better than they were a year ago. What is most important now is that we not take this recovery in global confidence for granted.

Five core global priorities stand out.

• The United States' economic performance has continued to be exceptional. But it will be crucial that Americans not take our economic expansion for granted and that we continue to plan prudently: in particular, by reserving a lion's share of projected budget surpluses to pay down the national debt, and avoiding inappropriate and economically unwise tax cuts of the kind that the President vetoed today.

• Crucial to a sustained and balanced United States expansion is greater balance in the growth of the global economy.

• Some upturn in demand appears to be under way in Europe. Looking ahead, recovery should be increasingly based on domestic demand. It will also be essential to achieve structural reforms that can support higher levels of investment and the more rapid creation of private sector jobs.

• There are now some initial signs that Japan's economy is moving out of the deep recession in which it had been mired for so long. It seems clear that policy steps taken over the past year to stimulate the economy and stabilize the financial system

are having an effect. However, prospects for the future remain uncertain, particularly in light of the weakness in private demand. A continued Japanese commitment to continued stimulus, using all available tools, will be critical until a solid, self-sustaining recovery led by domestic demand is firmly entrenched.

• We can all be encouraged by the turnarounds we have seen in several emerging markets over the last year. Nonetheless, lasting recoveries will only come through continued commitment to economic reform. And here progress continues to be uneven, with some countries having yet to put in place viable strategies for long-term reform and growth.

• The situation in Russia remains a serious concern. We will discuss with the Russian authorities this weekend their prospects for putting a credible reform strategy in place, and certainly the dominant issue will be the establishment of a functioning rule of law.

• With respect to the Y2K problem, we expect the IMF this weekend to agree to establish a special short-term facility to enable it to respond, in the event that such support could be useful, to international liquidity problems relating to Y2K that may arise in some countries.

• The reform of the international financial architecture is a continuing challenge. There can be no question that the international financial institutions are indispensable - but that does not mean we can be satisfied with them as they are.

• We are coming to understand better the roots of the financial crises of recent years and I expect that we will have discussions at these meetings of critical priorities; notably, the need for more sustainable debt management and exchange rate policies in emerging market economies and more sophisticated tools for crisis response.

• Let me also say that I look forward to the formation of the new G20 group of key industrial and emerging market economies. This will be formally launched at these meetings and I expect will have its first meeting before the end of the year.

• This partial recovery in global confidence affords us a unique opportunity, at the dawn of a new millennium, to focus on what is one of the more important financial problems - and certainly the overarching moral problem - which the 20^th century has left unsolved. Namely, the failure of large parts of the world to achieve even the most basic standard of living for the people who live there.

• We expect these meetings to endorse the Cologne initiative for the Highly Indebted Poor Countries. This has as its centerpiece a major change in the World Bank and IMF's approach to these countries focused on ensuring that our official development assistance translates into much greater reductions in poverty.

• We also expect broad agreement on how to finance this initiative, with a central reliance on mobilizing the IMF and World Bank's own resources. To meet our share of needed bilateral contributions the President has now submitted an amended budget request asking Congress for nearly $1 billion in appropriations over the next four years.

• In the wake of recent developments in Russia, the United States and others in the G7 will be calling for authoritative reviews by the IMF and the World Bank to identify ways to strengthen safeguards on the use of IMF and World Bank funds. We believe and expect that this review should focus its attention on three critical areas:

• Third, strengthening the IMF's capacity to deter and penalize misuse of its funds, including in "post-program" cases where all disbursements have been made.