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Office of the Press Secretary

For Immediate Release May 11, 1998
                           PRESS BRIEFING BY 

The Briefing Room

2:50 P.M. EDT

COLONEL CROWLEY: We have the Assistant to the President for National Security Affairs Sandy Berger; the Assistant to the President and Chairman of the National Economic Council, Gene Sperling; and the Deputy Assistant to the President for National Security Affairs Jim Steinberg. We'll start with Sandy.

Q -- Indian missile testing?

MR. BERGER: Give me a chance to say something before you --

Q News of the day.

MR. BERGER: I'm going to start by talking a bit about the trip, as will Gene and Jim, and then we'll come back to questions.

We will leave tomorrow early afternoon for the President's trip to Germany and then on to the U.K. for the G-8 Summit and the U.S.-E.U. Summit, which will take place over the weekend and on Monday. I want to start by giving you some overview of the trip, including the President's stay in Germany, his bilateral meetings while he will be in Birmingham, and the political agenda of the U.S.-E.U. meeting. Gene Sperling will preview the economic and financial issues that the leaders will discuss in Birmingham and London. And then Jim Steinberg, my deputy and the U.S. sherpa for the summit, will sherp for you -- (laughter) -- and in so doing will preview the broad agenda of the G-8 Summit, which he has played a very important role in shaping.

One of the great challenges for our generation is to build a new world of democracy and peace out of the rubble of the Cold War. This has been one of President Clinton's central goals from the very beginning of his presidency. A few weeks ago the Senate ratified the admission of Poland, Hungary and the Czech Republic into NATO, three states that not so long ago were behind the Iron Curtain. This was a culmination of a vision that the President first set out in Brussels four years ago. And in the last month, President Yeltsin formed a new government, probably the most reformist in the seven years of Russian democracy.

These two events are fitting curtain raisers for the President's trip, beginning tomorrow: To Germany, the country now united, that straddled the wall that divided Europe; to Birmingham to meet with the G-8 which now includes Russia; to London for the semi-annual meeting between the United States and the E.U., which is undergoing profound change as it reaches out to the east and creates a common currency.

In short, this trip is an opportunity to take stock of the President's far-reaching vision set forth in 1994 to create a peaceful, democratic, united Europe for the first time in history, and to discuss the next steps we must take to complete that journey -- next steps on NATO, the E.U., OSCE, and other key institutions that bind us to Europe.

Let me talk a little bit chronologically as we take off tomorrow. We arrive in Berlin very early Wednesday morning. The President will first -- this is the President's first visit to Germany since 1995. The visit will include stops in Berlin, Potsdam and Eisenach, and will focus on efforts to build collectively an integrated Europe.

The first day, Wednesday, on May 13, will begin with a working lunch and meeting with Chancellor Kohl at Frederick the Great's Palace, Sanssouci, not to be confused with a famous former restaurant in Washington of the same name. They will talk about Bosnia; they will talk about preventing violence in Kosovo, about providing support for Ukraine, about Turkey's future and the range of bilateral issues that exist between us and Germany.

The President will also give a major speech in East Berlin. He will focus on the steps necessary to prepare U.S.-European partnership for the coming days, the steps ahead, as I said in my opening comments, to complete the vision that the President set out, his ambitious vision for a united, peaceful Europe.

President Herzog will host a state dinner in Adlon Hotel, which was rebuilt on the original site next to the Brandenburg Gate. And we will have a brief meeting with Gerhard Schroeder, the Social Democratic candidate for chancellor, who the President will have the opportunity to meet for the first time.

On Thursday, we will start in Berlin and commemorate one of the most dramatic moments, dramatic chapters in our century's fight for freedom; that is the 50th anniversary of the Berlin Airlift at Templehof Airport, where the allies first flew in supplies and kept Berlin alive during that extraordinarily tense time.

We will also travel further into East Germany to the town of Eisenach, which is an opportunity for the President to see and highlight Germany's remarkable success in bridging the divisions of half a century in less than a decade. We will visit the General Motors Opel plant, site of a major investment making automobiles for the German or for the European market. We will tour historic Wartburg Castle, where Martin Luther translated the Bible into German.

Then on Friday we will fly to the U.K. where we will first arrive in Birmingham. I will let Jim talk about the actual summit meetings that will be Friday, Saturday, and Sunday morning. Let me just talk about the bilateral meetings that the President will have.

He will have three scheduled bilaterals, one with Prime Minister Hashimoto, one with President Chirac, and one with President Yeltsin. The is the first meeting -- the first meeting will take place with Prime Minister Hashimoto on Friday morning. We expect the focus of this meeting to be on the strong bilateral relationship between our two countries; on the security issues that we are working on together, including implementation of the defense guidelines; on the Asian financial crisis and the efforts that Japan is making to promote economic recovery.

On May 15th, the same day, the President will host -- excuse me -- President Chirac will host President Clinton for lunch in Birmingham. This also will be, I'm sure, a fairly wide-ranging discussion. The two have talked quite frequently before, during and after the President's trip to Africa -- an interest that President Chirac has had for a very long time and an issue that the two of them will raise collectively at the summit.

They will, I'm sure, talk about issues such as Kosovo, Turkey and the E.U., Cyprus and Bosnia. I expect Iran will be covered, as we work to advance cooperation with the E.U. on weapons of mass destruction acquisition and support for terrorism.

We'll also be talking with President Chirac about the NATO Summit which will take place in Washington in 1999, a major event at which not only the three new members will be sort of formally first participating, but which will map out really where NATO is going for its next period.

Finally, the President will meet on Sunday with President Yeltsin, May 17th. I'm sure the President will want to hear from President Yeltsin what his expectations, plans, priorities are for his new government. He will reiterate our commitment to work with Prime Minister Kiriyenko and his team to support economic reform and Russia's further integration into the international institutions, such as the G-8.

The President will stress the importance of close consultations with Russia about critical international issues, ranging from Kosovo, Iraq, our concerns about weapons proliferation, and others. And I suspect that there will be some discussion of a summit in Moscow, as I've said -- as they've discussed, once START II has been ratified.

Let me finally conclude briefly with Monday, where the U.S. and the E.U. will meet. They meet twice a year in a formal way at a head-of-state level. This time Prime Minister Blair will be -- is chair of the E.U., and he and Jacques Santer, the President of the E.C., and the President will meet. These summits have been the catalysts for progress in our E.U. relationship. Gene will have more to say about this, but there is obviously dramatic changes going on in the E.U. as it broadens and deepens, as it reaches out, as it creates a new currency. These are all quite sweeping developments, not to mention political agenda that we have on many of the issues that I've already discussed.

Let me go further and ask Gene to talk about the economic issues, and then Jim to talk specifically about the G-7/G-8 Summit, and then we will take some questions.

MR. SPERLING: Actually, we were thinking that it might make it easier for everybody if Jim just took a minute or two to give you an overview of the G-7/G-8, and then I'll go into the economic issues.

Q Which is it -- G-7 or G-8?

MR. STEINBERG: Helen, somehow I thought you were going to ask that question. Let me tell you just a little bit about the structure of the summit this year. Then Gene will talk about the economic issues which will obviously play a very important role, and I'll talk about some of the other issues following that.

First, let me just say sort of in general terms, the structure of this summit is going back -- trying to, in effect, go back to the roots of these summits back in the 1970s by trying to adopt a much more informal structure for the discussions. Unlike in recent years, the ministers will not be present at the summit. As most of you probably know, the finance and foreign ministers both met in London this past week to do some preparatory work. But this will be a meeting involving the heads by themselves in all of their sessions. The discussion will be much less formal than in the past.

There has been an attempt to reduce the number of items on the agenda. And I think as you will finally see at the end, that there will be a much pared-down communique reflecting the more focused effort of their discussions and an opportunity for them really to have more time to address in a less structured way the issues that are most on their mind.

The formal beginning of the Birmingham Summit begins with a reception at the Council House at Birmingham on Friday evening. That will be preceded by a meeting of the seven leaders in which they will talk about some of the international financial issues. And Gene will talk in more detail about that.

The first real discussions of the Eight will be at dinner, where there is no formal agenda, but one expects that the issues, particularly the political and foreign policy issues, will dominate those discussions.

On Saturday the leaders will go out of Birmingham to an as yet undisclosed site to discuss a range of topics, but focusing primarily in three areas: one, the international economic situation, which will look not only at the issues involving emerging economies, the Asia financial crisis, but also development issues and environment. They will also discuss international crime, and finally they will discuss employability and how we can make sure that the benefits of economic opportunity are shared among all our societies. Then there will be a final session on Sunday morning, and following that, Prime Minister Blair will release the communique.

I think one of the things that unites all of the major themes that will be discussed in these topics is the conviction that the leaders have that global integration is a force, very positive force that we need to shape for the good of our citizens, but we need to focus on making sure that the benefits of globalization are shared not only within our societies, but among all societies of the world. And in each of its ways, the three main topics of the discussion will contribute to that basic theme.

So let me have Gene say a word on the economic issues; then I'll come back and talk about the others.

MR. SPERLING: As Sandy said, the President's first bilateral will be with Prime Minister Hashimoto, which will clearly have a strong economic component. Issues the President will speak with are certainly ones that are familiar to many of the people here.

As you know, our administration, our government has had a very clear three-part message on the importance in the Japanese economy of having demand-led growth, market access and deregulation and finally strengthening and restoring confidence in the banking and financial system.

On the demand-led growth side, as you know, we welcomed their fiscal package as being one that we felt was substantial and was a positive step forward, but stressed that this needs to be done in conjunction with the market access deregulation issues and the restoring of confidence in the financial structure and that together, it is these reforms that will together make a difference in bringing back the growth that Japan's had, which has never been more important, because Japan is very much the engine of growth in the Asian region and nothing is probably as important for restoring the economic recovery of Asia as this economic recovery of Japan itself.

In that light, as you know, last year at the G-8 meeting, and the G-8/G-7, Helen, in Denver, the President and the Prime Minister agreed to launch a new bilateral effort, the enhanced initiative on deregulation and competitive policy. There has been significant work done over the last year, and we are hopeful that with additional work and additional talks and negotiations going on -- that we would be able to announce a strong package of market opening, deregulation in such areas as telecommunications, financial service, housing, pharmaceuticals, and opening Japan's distribution system.

We are -- again, discussions are going on, and there are still issues at stake, such as ensuring that in the telecommunications area that there is incremental costing for the interconnections that allows us a chance to compete in the local telecommunications market.

On the banking side, again as you know, in February Japan had a 30 trillion yen initiative, of which 17 trillion was dedicated to deposit insurance and 13 trillion to injecting public capital in banks. The messages that we will, the President will talk about with the Prime Minister include the importance of ensuring that when there are injections of public capital of the 13 trillion, of which 1.8 trillion yen has gone out so far, that those injections of public capital be closely connected and linked with the kind of conditionality and restructuring that are important to restore confidence in the banking system and not be seen as either propping up insolvent or inadequate banks.

In addition, I think it's clear and I think Japan as well understands the need for stronger supervision which certainly includes the hiring and training of additional bank supervisors, again, is the three of these things together that will help restore overall confidence and help bring Japan -- we feel will help Japan in bringing back recovery that will be good for the Japanese people, but also for in giving American businesses and workers a chance to compete in that market, and our belief that competition and innovation is helpful for everyone.

Again, with the -- never has this been more important than in the following where Japan plays such a critical role in the restoration of growth to the region as a whole.

In the G-7 meeting that will go on before the formal G-8 starts, certainly, the issues that the President will be talking about and hoping to make progress on are what has been called the financial architecture issues, and let me put it in four areas. One is the improvement of better information transparency of national economic data. And I think that if you wanted a very specific example of where this has been critical is that in at least two or three of the countries that have had serious financial problems, there have been problems where the world investment community could not accurately determine what was the usable central bank reserves. And ensuring that we have better transparency and better information on this we feel not only helps prevent or mitigate these types of crises, but the knowledge that the world investment community would have this type of information would itself encourage countries to adopt more stable and responsible policies in the first place.

Also, as part of the better information is ensuring that there is better qualitative information on the strength of a country's bankruptcy system, of the details of their bank supervision, and the other things that we have see are very important for handling and working out financial problems once they have started.

A second overall area is ensuring greater transparency within the IMF itself, and allowing and encouraging IMF to be more forthcoming with its data, with letters of intent, with discussions of Article IX discussions; and then, secondly, to increase incentives to improve transparency and to publicize gaps in other countries' programs. In other words, where a country does not have adequate data that the IMF would publicize that and by making that aware to the investment community, make that country feel the urgency and the incentive to remedy that gap.

The third issue is strengthening the financial systems. And if you were looking for one common denominator that goes across virtually all of the problems in Asia and, in fact, has probably been a problem that virtually 60, 70 percent of most major countries have dealt with at some time in the last half century, that has been the problems with the banking and financial system. And I don't think any country, and certainly not ours with the S&L crisis, has been immune to this.

But the type of action steps that would be important is -- have created national core standards for effective bank supervision, increasing those to areas like bankruptcy regime, accounting and disclosure -- the kind of directed loan issues that have been responsible for building excessive capacity in South Korea and other countries, is an important area, as is the international surveillance of financial regulatory issues.

And then fourth and finally, the one that has probably gathered the most attention has been the private sector burden sharing, or as it has often been discussed as the moral hazard issue. And that is to ensure that as you're having systems, that you are not in any way negating the positive steps you're making in these first three areas.

In all of these areas you're trying to bring information and the discipline of the market on private sector investors and the countries. And the key is to do this in a way that does not in any way -- is not negated by areas where investors feel that they will, quote, in any way be bailed out or made whole, and not bear both the up and the down sides of their investment decisions.

And we've seen some of the type of private sector burden sharing in Korea, where banks have been asked to work together and to be part of rolling over the debt part of the program. That is the type of thing that needs to be worked on and certainly, looking at new, more flexible forms and debt agreements and exploring the degree that the IMF can continue lending when a country is undertaking reforms are the type of issues that will be discussed and I think are the type of issues that have been among the most written about by those who are experts in this area.

Another important economic issue that Jim will talk about is the Africa debt relief issues. As part of the G-8 discussion, as Jim said, the issue of employability will be on the table Saturday afternoon. Prime Minister Chretien will lead a discussion on employability and growth. We had a ministers meeting on this in London earlier. Let me just say a couple of point on this.

One of the issues that people found very interesting in the ministers session was in the degree that we in the United States have found ways to encourage people to move from welfare to work without having the type of rigidities that tend to decrease incentives for hiring people. And there has been a lot of interest, for example, in our earned income tax credit. And the reason is that that tax incentive goes directly to the worker, and by going directly to the worker, it doesn't put any burdens at all on the business. So it encourages work without any of the obligations on the employers that have, however well-intentioned, probably led to some rigidities and inflexibilities in the European labor markets.

The second point I'll just make is I think that this will be a more interesting topic than it was even earlier because of the EMU. And I think that, if you see the discussions that go on, is how the EMU and how the Euro will progress, is what happens in a country where they're having a weak labor market but their national government no longer has the ability to affect that through monetary policy or currency devaluation. And the question will be, will there be the kind of flexibility where people can move to where the jobs are in a market that now includes moving from one country to another.

Well, whether or not people get to that issue, I think how well people are at least able to move from jobs within their country to areas or regions that have stronger economic growth will be a very important issue that will be on people's minds now. And so I think that this will tie in and be more relevant with the now successful launching of the Euro.

And then finally on Monday is when there is the U.S.-E.U. partnership. And as you know, this was -- 1995, the U.S. and the E.U. committed themselves to expand and deepen cooperation on economic issues. The main point that I would make here is simply that there have been discussions over the last year. The European General Council did reject, as some of you might have read, a U.S.-E.U. transatlantic agenda that was the recommendation of the European Commission. But the important thing is that they did not reject the idea of a U.S.-E.U. initiative, simply that particular recommendation.

And as we speak, there are ongoing discussions that we are still working on, on the degree that a U.S.-E.U. economic initiative could be launched on Monday that could deal with both bilateral issues and helping to strengthen going forward on multilateral trade issues as well as encouraging private sector initiatives that would include -- would now reach out not just from business, but to labor and environment as well.

So with that, I'll give you Jim Steinberg.

MR. STEINBERG: Let me just touch briefly on the other two main topics that will be the subject of the summit, and then we'll get to your questions.

On Saturday morning, the leaders will turn their attention to the problem of transnational crime. This is something that we are particularly pleased that the Eight are taking up this year, because the President has placed a great deal of emphasis on the need for greater international cooperation to deal with transnational crime.

In particular, as you know, the President tomorrow will be talking about his own international crime control strategy, setting the stage for the broader discussion that we'll be having in Birmingham. In particular, for those of you veterans of this, you will recall that back at the Lyon Summit, the leaders set out a process in which they created both a working group and announced 40 recommendations for combatting international crime.

This year, they will have an opportunity to review their success and achievements under that, and also lay out some new areas where we can strengthen cooperation. These include strengthening our ability to achieve our "nowhere to hide" goal by improved extradition and lowering domestic barriers to bringing criminals to justice, and new efforts on money-laundering and particularly on seizing and sharing assets gained from criminal activities; more emphasis on sharing information on techniques for making borders more secure; developing new methods for trapping, tracing and sharing evidence of high-tech crimes.

The high-tech crime problem was the subject of a ministerial that was hosted by Attorney General Reno and the recommendations from that will be discussed in Birmingham. We'll also be discussing establishing systems for identifying and investigating illegal trafficking in firearms and drugs, and for stopping the smuggling of illegal immigrants; and finally, greater emphasis on creating information structures that allow sharing of information between law enforcement agencies among our various countries.

The other main topic of conversation on Saturday will be the challenge of making sure that the benefits of integration are shared and the challenges dealt with by all of our countries. That means in addition to discussing some of the political aspects of the Asia financial crisis, the leaders will also be talking about our development strategy. It's an issue that has been very much at the center of the discussions of the Eight for the last several years. And President Clinton will lead a discussion on Africa, drawing on both some of the initiatives that we have launched in the past year and his own recent trip to Africa.

I think one of the important emphases here will be how we can continue to support reform in both the economic and political sphere in Africa, particularly to give a boost to countries as they try to overcome some of the legacies of the past; making sure that both aid, trade, and debt relief are all harnessed together in a coordinated way to help these countries spur growth and opportunity for all their citizens.

And there will also be a discussion of how to help post-conflict societies, how to help deal with the particular problems of the countries in Africa that are trying to escape from conflict and try to build economic, political, and social structures that provide greater hope for their people.

In the context of these discussions of development, there will be a discussion of the environment, with a particular focus on climate change. As you will recall, last year was the year before Kyoto and there was considerable discussion about how to reach an agreement among industrialized countries on climate change which led to the Kyoto protocols last December. This year, the Eight will talk about how they can coordinate their efforts both to make sure that we move forward together on trying to reduce greenhouse gas emissions in our own countries, but also how to gain greater cooperation from the developing world in terms of their efforts to achieve climate change, to achieve reductions in greenhouse gases that affect climate change, leading up to the very important meeting of the Conference of Parties in Buenos Aires this November.

So they will talk about how we can harness things like the so-called "clean development mechanism," which allows developed countries to transfer technology to developing countries as a way of helping both developed and developing countries meet their efforts to achieve greenhouse gas emissions.

MR. BERGER: Now, as part of our policy of no place to hide, we'll take your questions.

Q Tell us what the danger is, as the United States sees it, is in India's conducting these nuclear tests.

MR. BERGER: We are deeply disappointed by India's decision to test nuclear weapons, at least by its own announcement. Our position has been very clear. We have urged countries to exercise restraint in the testing of nuclear weapons -- either countries that are declared nuclear powers, or countries that are not. We have ourselves, along with the other five declared nuclear states, stopped nuclear testing. We have signed the CTBT. And we think this is an unfortunate development.

Q Is this because of India's historical fear of Pakistan? Is that what is driving these tests?

MR. BERGER: Well, there are always regional contexts in which arms races take place, but in our judgment we do not think that that justifies this step.

Q How about the missiles testing?

MR. BERGER: We would like to see restraint on the part of India and on the part of Pakistan both with respect to its nuclear weapons programs and with respect to its ballistic missile programs.

Q There was no forewarning? Have you had an indication --

MR. BERGER: We have made known to the Indians -- we have made it quite clear to the Indians that we would strongly urge them not to undertake such a test.

Q Their response? Might they now draw back and not do the test?

MR. BERGER: Well, we would hope that they would not undertake any further tests, and we would hope that this would not provoke a new round of escalation.

Q How about sanctions?

MR. BERGER: There are U.S. laws that operate in this field that apply to so-called non-declared nuclear states. We will examine those laws very carefully in the context of the reported actions today and we will obviously enforce our laws.

Q You said just now reported actions, you said, at least by its own announcement. Is there any doubt on the part of the U.S. government that they did, indeed, test three nuclear weapons?

MR. BERGER: We don't have any independent confirmation as of this point of it, David, but they have so stated. We have no reason to believe that they haven't.

Q You mentioned the arms race. Is that what this is now? Is there now an arms race between --

MR. BERGER: There has been in South Asia and in the larger region a dynamic of proliferation that has gone on for over 20 years. This didn't start today. We have tried over the years, as have previous administrations, to urge restraint. In some cases, we have been successful, in some cases we haven't. We will continue to work toward that goal.

Q Does India's decision put at risk the President's plans to travel to India?

MR. BERGER: We have no plans -- we don't plan to change our plans. That's poor grammar. Our plans remain unchanged. I think it remains important, Susan, that we continue our dialogue with Pakistan, with India. There is an enormous amount -- India, for example, and the United States are the two largest democracies in the world. There is an enormous amount of common interests that we have. But I think we have a better chance at de-escalating or at least slowing these kinds of actions if we remain engaged than if we don't.

Q Mr. Berger, you mentioned that would enforce U.S. laws, but is the U.S. considering any further sanctions against India, other than --

MR. BERGER: There are laws that pertain to these kinds of matters, some of which do involve sanctions. No determination has been made. We are reviewing those laws to determine what the facts are, what the law is, and whether the law applies to these facts.

Q Sandy, back to the G-7. The Japanese have indicated that they wanted the main topic or one of the main topics of the G-7 and the bilateral meeting with President Clinton to be the issue of the nonperforming debt, or what they're calling the foul debt. They obviously have some proposals with regard to this. I wonder if the U.S. has any particular proposals themselves regarding this foul debt problem.

MR. BERGER: Gene is in charge of foul debt. (Laughter.) I'll turn this over to him.

MR. SPERLING: You're referring to within their own banking system, their own nonperforming loans? Well, we have considerable discussions with them, as you know. There has been a fairly steady stream of their economic officials coming this way, and Deputy Secretary Summers and others have been in discussions. So we are aware of much of what they're doing. I do not know if you're referring to something new.

As I mentioned, they have a 30-trillion-yen proposal and I'll spare Bloom going through the details again. But I guess we have been stressing the importance of conditionality and to actually having the type of restructuring. As you know -- and one point I would make, we know that in our country, there was a period at the beginning of the S&L where we didn't take the tough steps, where we had some of the regulatory winking and forbearance. And I think it is widely thought right now that that multiplied the cost that the United States had to eventually deal with, had to pay to deal with the S&L crisis.

And I think for those who survey banking crises or banking problems that have happened in different countries, that is probably the number one lesson that's learned is dealing quickly and taking the tough steps to strengthen the good banks and restore the confidence and not prop up bad banks has been the thing that would, in looking back, have saved the most. So I think we say that, having learned the hard way ourselves.

Q There's been a lot of commentary in recent weeks about President Yeltsin's behavior and sort of about all the tumultuous things that have been going on in Russia. When you say that his new government is probably the most reformist government in seven years of Russian democracy, what's your take on what's going on there? Do you think that Yeltsin is in control and has got a good grip in power? What's your assessment? Why do you call them -- reformists?

MR. BERGER: I think that President Yeltsin does have a grip on power, does have control of his government. I think he took a rather bold action about four weeks ago in dismissing a government he felt that was not moving swiftly enough towards meeting the economic needs of his people. He has appointed a new government that is young, that is basically -- does not carry enormous baggage, that has generally been pragmatic and committed to reform. I find that very encouraging.

The fact that Prime Minister Kiriyenko is 35 I think is not necessarily a handicap when you're talking about trying to remake a system which has been frozen for all of those years and a command economy. And his deputy prime ministers are all men of enormous competence and professionalism.

So I think we're encouraged by the government. Obviously, there are a lot of problems that the Russians face in terms of getting their economy growing at a more rapid rate, attracting investment, getting taxes collected, et cetera. We want to help them do that. But I think in many ways the events of the last month suggest that President Yeltsin made a gamble and won.

Q After Mexico, the G-7 met in Halifax, adopted a whole bunch of reforms that did nothing to head off the Asia crisis. Is there anything that you can point to specifically in the reforms that you are formulating now that you think honestly, two years from now, will head off a future crisis?

MR. BERGER: Let me ask Jim to take that. Gene?

MR. SPERLING: Look, in any type of public policy, you make the best steps and you try to make things, improve things as much as you can. I think that out of Halifax came the emergency mechanism used in the IMF, which I think did allow for a quicker response in situations than probably was available in Mexico. I think the -- core provisions on banking supervision is something that maybe you would have liked to have had years before and had been implemented stronger, but is a positive step and becomes a model to look at other areas, whether it be bankruptcy or loan classifications or other things.

So in any public policy, you're always looking off the baseline, how -- or the counter -- how would things be if you hadn't done what things were. But I think that in looking at the reforms going forward, whether they will prevent unknown situations that will come up, nobody can foresee the future. But you can look at particular problems that happened here.

It is very clear that people looked at the gross reserves in the central bank, and that that was not an accurate reading of what the real reserve situation was and what the real exchange rate risk was. And had there been a better sense of what were usable central reserves that were not committed in either future contracts or something else, you would have had a much -- the market would have had a much better sense of what was going there, and it would have been much less likely that more money would have flooded in and helped create the situation we did.

Also, if you look in South Korea, you can see the mixture of how the banking situation, the inability to read what the strength of the banks were related to people's reading, again, of how strong the currency reserves were.

So I think when you look at the areas you're looking at, transparency and better accounting and standards in banking, better accuracy on the central bank reserves, I think you can look at specific problems that happened in Thailand, South Korea, and Indonesia, and at least say that, had those things been in place, things certainly would have been better. And obviously the goal is that if you have full transparency and better information, those governments know that investors would understand those. Then that would have maybe led them not to have put themselves in such risky situations in the first place.

And then the other side is, are there things here that would help us deal with the problems once they've happened. And the kind of private sector debt burden sharing and how you deal with these problems, having mechanisms that allow for more things like you saw in South Korea, where the international private banks were made to come in and be part of the solution in helping rolling over the debt. That is the type of thing that if it was able to be further institutionalized, would certainly help in dealing with these problems when they take place.

MR. STEINBERG: Let me just add one more word. The other piece of this I think, going back to Halifax is that while a number of countries, particularly in East Asia, experienced -- are continuing to experience economic difficulties, a lot of other countries have weathered this reasonably well. And part of it is because steps were taken, post-Halifax, both internationally and nationally, to try to strengthen economic systems. And so if you look at, for example, Mexico, Brazil, Argentina and others who have been able to take steps during the course of these crises, the danger of massive spillover, which had been of great concern, was to some extent reduced by the fact that there were steps in place in countries and the international system had taken measures.

There are two parts to what we are trying to do in Birmingham. One is obviously where possible, to prevent crises. But I don't think anybody would assume that we could develop a foolproof system, and that's why the second part is to strengthen our response mechanism. I think the response mechanism is better since Halifax, but it clearly can be better yet, and that's what we'll be doing at Birmingham.

Q At the President's Berlin speech, you said the President would focus on the steps necessary to complete his vision for Europe. You mentioned NATO, EU and the OSCE. But can you give us a hint as to what those steps would be?

MR. BERGER: We'll wait for the Berlin speech. I think that we have a NATO summit coming up, as I said, in '99, which will deal with not only the question of the pace of further enlargement, but also the strategic concept of NATO. Obviously, the core concept of NATO continues to be defense of its members. But at the same time, NATO has been engaged in Bosnia, and there needs to be a rethinking of what NATO's strategic concept is.

OSCE as the one organization that really spans all of Europe, can be invigorated and already is playing a larger role, whether it's in Nagorno-Karabakh or hopefully in Kosovo. The Euro-Atlantic Partnership, which grew out of the Partnership for Peace, is another institution that brings all of Europe together, as does the Partnership for Peace itself. And what we are creating here is an interlocking web of institutions that create an increasingly united Europe.

Q Is the President going to talk about the German situation today, though, when he talks to the German people? Is he going to address concerns that the administration might have, for example, about the resurgence of the right wing in Germany? I mean, are those kind of things going to be touched on?

MR. BERGER: I think first of all one has to put that in perspective. Germany has a remarkable record in the post-war period of in a sense bringing under control and dealing with the forces of darkness that gave rise to World War II. But in Germany, as in the United States, there are radical fringes who continue to perpetrate hate, and I suspect the President will have something to say about that.

Q Mr. Berger, will you give us your take on whether there is any reason to believe that when Secretary Albright meets with Prime Minister Netanyahu, that there can be some progress on the U.S. proposal that Israel concede another 13.1 percent of West Bank land?

MR. BERGER: I think that our objective here is not to posture, our objective is to help the parties succeed in beginning final status negotiations. For 15 months, we have shuttled back and forth, and I think have quite a clear idea of what it will take to get those negotiations started.

In the conversations that Ambassador Ross had in Israel over the past few days, it is clear that differences still remain, but there were some positive elements and there were some areas of clarification that the Prime Minister sought. I think the President felt it would be worthwhile since the Prime Minister is coming, in any case, to Washington this week to continue that discussion and to continue to see whether we can find -- or the parties can find -- in this case, whether the government of Israel can find, with our help, creative ways in which we can get to yes.

Q Does it bother you that some Jewish-American organizations today have continued denouncing the administration for what they claim is untoward pressure on Israel?

MR. BERGER: There is no pressure on Israel. I think I'd have to disabuse everyone of that notion. What we have said is, after 15 months of trying to pursue an idea that Prime Minister Netanyahu first put on the table -- that is, let's go right to the final status negotiations -- for 15 months we've been trying to find the way to do that. We have come to some conclusions as to how to bridge the gaps. We have offered those ideas to the parties. Chairman Arafat has agreed to them. Prime Minister Netanyahu has not at this point. But it's for Israel to make choices about its own security. All we can do is to do our very best in an unrelenting fashion to try to help the parties get back into a negotiation.

We have no intention of pressuring Israel. Israel is a close and cherished ally of the United States. We believe that getting the peace process restarted, getting final status negotiations started will be in Israel's interest, it will be in the interest of the Palestinians and the Arabs, it will be in the interest of the United States and the interest of the world.

Q What are the positive elements that you've seen?

MR. BERGER: Well, I'm not going to discuss, Helen, specifics, our ideas --

Q Why can't we know what's going on?

MR. BERGER: Because, unfortunately, you don't have the -- you have a great deal of power, but not the power to act for the Israeli government. There may be something I'm missing. (Laughter.) I think our diplomacy will take place in private. These are carefully considered thoughts, ideas that we have developed over 15 months of going back and forth and trying to be creative. And we will try to continue to be creative this week with --

Q What do you mean by creative? Making compromises?

MR. BERGER: No, we are not going to water down our proposals. But the essence of diplomacy is trying to find creative solutions to difficult problems.

Q Sandy, there was a report today that the U.S. would withdraw from the Middle East peace process if you can't reach -- is that true?

MR. BERGER: No, I think we're not going to -- we have a deep commitment to trying to pursue peace in the Middle East. I think the Secretary has said that if this enterprise that we have been engaged in for 15 months proves to be not productive in its objective, which is to get the final status negotiations begun, then we will have to examine other ways in which we can be useful in that process. But we continue to remain committed to the peace process.

Q Mr. Berger, your proposal that you're laying on the table and discussing, does it involve a greater U.S. role in the region?

MR. BERGER: No, it does not. First of all, let me make it clear here that we're not talking here about what the end state is. What the end state is has to be decided between the parties as a result of final status negotiations, which are scheduled under Oslo to conclude in a little less than a year.

These are -- in a sense, this is the road map back to the table. This is how do you get to the table. And it involves, as you all know, security steps that the Palestinians should take, further redeployment steps that we would hope Israel would take and restraint on unilateral actions during this period. These are American ideas. These are our best judgment. It is for the government of Israel and the Palestinian Authority to make their own own judgments as to what is in their interest. And I guess that the last thing I would say, coming back to Sam's question, I believe that most Americans and most American Jewish leaders want us to continue to try to get the parties to "yes" on the peace process.

Q But, Mr. Berger, what if they continue to say no to the U.S. ideas for the steps? What if Israel continues to say no to the U.S. ideas?

MR. BERGER: We will -- I'm not going to speculate on that. Secretary Albright spoke to the parties I think in the last few hours. Prime Minister Netanyahu, as I said, is coming here on Wednesday. Let us use the time that he is here to try to see whether there can be movement. And when we get back from Europe, the President will meet with the Secretary and others, other advisors, and we will decide what the next steps are.

Q But that's the rub. You say it's Israel's decision for her own security, that these are just proposals. But then you say, we will not water down our proposals, it sort of sounds like take it or leave it.

MR. BERGER: Sam, as I said, we have over 15 months gone back and forth between the parties. We have made our best judgment of what it will take to get these negotiations resumed. All we can do is offer our best judgment. And then the parties have to decide whether or not they can get there. And we will endeavor to assist them in getting there. But it's their judgment, not ours.

Q Will the U.S. sponsor a summit among the parties if Netanyahu does not agree with the United States' best judgment?

MR. BERGER: I'm not going to speculate, Scott, on further steps. At this point, we will go the extra mile. We very much want, as I said, for the parties to succeed in getting these final status negotiations begun, which Prime Minister Netanyahu proposed and which Chairman Arafat agrees to, and we will see how the discussions go this week.

Q What's the problem?

MR. BERGER: What the problem is the terms by which you get back to a negotiation. There are certain things that are outstanding from the Hebron Agreement, from the Oslo process, that have to be -- there has to be an understanding between the two before final status negotiations can begin.

Q Mr. Sperling, you reiterated the U.S. concern in regard to Japan's economic policies. However, these points are kind of reiterations of the same points made by Treasury Secretary Rubin. What do you hope to accomplish by reiterating them? What would be the best outcome? Would it be that Prime Minister Hashimoto would announce concrete steps to fulfill these points?

MR. SPERLING: I think consistency is a virtue, and we have had a consistent -- and we have a consistent and clear message. The goal is that what's best for the Japanese people and the American people and the overall Asian economy is the same thing, which is to get growth and demand-led growth back in the Japanese economy, and to strengthen financial confidence.

And we're not saying there are easy answers on these. We are expressing our views in ongoing discussions, but we feel we have international responsibility to express those views firmly and clearly, and our hope is that there will be ongoing discussion and progress. Ultimately, the steps have to be taken in Japan and they have to decide that they are what's best for the Japanese people.

But as you should know, Prime Minister Hashimoto on the deregulation initiative has been very clear that he feels that opening these markets, bringing in the expertise and innovation and competition that comes from the competition of American firms is a positive thing -- a positive thing for service and consumers in Japan. And so we are in many ways just pushing to meet the goals that they have set out for themselves.

Q Gene, do you have a target figure on African debt relief?

MR. SPERLING: I don't.

Q Will the President cite a specific figure?

MR. SPERLING: I don't want to get into the details of that right now.

Q Could you tell us any more about the telecommunications program?

MR. SPERLING: All I would say is that that is an area that is under discussion. One of the key issues is certainly having -- insuring that the interconnection charges are on an incremental, I guess it's called long-run, incremental costs basis. And that is one of the issues that is obviously very important to us, important to the industry. And USTR is in discussions right as we speak.

So I don't want to say too much more, as both discussions on the U.S.-E.U. and on the deregulation are still going on.

Q Can you comment on Speaker Gingrich's statement that he wants to set aside the surplus for tax cuts?

MR. SPERLING: We are rock solid in our view that whether the surplus is $50 or $50 billion, it should be not drained for new spending or new tax cuts until we have a long-term fix for Social Security. And we will oppose any efforts to waive the pay as you go budget rules and drain the surplus for new tax cuts or new spending initiative by anyone until we have a long-term Social Security solution in place.

THE PRESS: Thank you.

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