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Treasury Secretary Summer's Press Conference, Brussels
(7/13: Key is to establish functioning economy in Kosovo)
 20 Jul 1999

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KOSOVO - Official U.S. Government Documents For more information regarding the latest policy statements and other materials related to the Kosovo crisis, visit http://www.usia.gov/regional/eur/balkans/kosovo/
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Text: Treasury Secretary Summer's Press Conference, Brussels
(7/13: Key is to establish functioning economy in Kosovo)

Brussels -- In a press conference following the meeting of the High-Level Steering Group July 13, U.S. Treasury Secretary Lawrence H. Summers said that once basic health care and other forms of humanitarian assistance were provided to the people of Kosovo, "what was really important was to establish a basis for a functioning economy."

"That means suitable currency arrangements, that means a capacity to mobilize revenues, that means a payment system that is not subject to Serb interference ... that means establishing the basis for enforcing contracts to create a basis for private sector exchange," he said.

Summers later explained in response to a question that by "currency arrangements" he did not mean a "new currency," but rather "procedures for allowing existing currencies to circulate in the area."

The High-Level Steering Group is composed of finance ministers and officials from the European Union and World Bank. Its purpose, according to Summers, is not only the "mobilization of funds" but, more importantly, "the question of pursuing an economic strategy and identifying an economic strategy both for Kosovo and for Southeastern Europe."

Summers said he was "very pleased with the meeting and, more importantly, with the framework that I think is being established for assistance to Southeastern Europe in general and Kosovo in particular."

Regarding the question of aid for Yugoslavia, Summers said there was "a clear commitment to provide support as rapidly as feasible for Montenegro."

Aid to Serbia, however, will depend on whether Yugoslav President Slobodan Milosevic goes or stays.  Summers said there was a consensus in the Steering Group "on the importance of presenting the people of Serbia with a clear choice between substantial efforts to promote economic expansion and a return to economic normalcy, after Mr. Milosevic goes, with an assistance program that would be limited to humanitarian assistance only ... in a context where Mr. Milosevic remained."

Europeans "will take the leading role and be clearly the leading providers of finance," Summers said.  "But we've made it clear that we also are prepared to play a role as we already have with respect to humanitarian assistance."

Past experience has shown that complex situations such as in Southeastern Europe must be carefully monitored, particularly how assistance is used, Summers said.  "The constraint is often the capacity to implement projects rather than the quantity of finance that is available. And so it's very important to focus on helping to develop the capacity to implement projects," including issues such as currency arrangements and the capacity to collect taxes.

Following is the unofficial text:

(begin text)

Secretary Lawrence Summers' Press Conference in Brussels
July 13, 1999

Secretary Summers:

Thanks very much for coming. What I want to talk primarily about is the meeting of the high-level Steering Group. You all will have seen the statement that came out of it. I was very pleased with the meeting and, more importantly, with the framework that I think is being established for assistance to Southeastern Europe in general and Kosovo in particular.

I think there were four significant things that came out of our discussions this morning. The first was a clear commitment by the Finance Ministers to function along with the EU and the World Bank as a steering group for the assistance effort to Kosovo and Southeastern Europe, both with respect to the mobilization of funds, and what I think is in many ways an even more important issue, the question of pursuing an economic strategy and identifying an economic strategy both for Kosovo and for Southeastern Europe.

In terms of our discussion of Kosovo, I think that there was very much an awareness that what one had to begin -- a crucial initial priority -- was providing relief of the most basic sort, basic health care and other forms of humanitarian assistance; that what was really important was to establish a basis for a functioning economy. That means suitable currency arrangements, that means a capacity to mobilize revenues, that means a payment system that is not subject to Serb interference, as the payment system in the Kosovo region has been for the last decade, that means establishing the basis for enforcing contracts to create a basis for private sector exchange.

I think we all discussed the experiences -- and of course, each situation is different -- but we all discussed the experiences in Bosnia and in West Bank/Gaza, and out of those discussions came, I think, a sense of the importance of assistance, that the importance of developing alongside assistance an appropriate and effective implementation framework, and one in particular that would reduce risks of corruption.

Third, we talked about the general challenge with respect to Southeastern Europe, and of course the ending of the military phase of the conflict somewhat earlier than was expected at one point, and the more rapid return of the refugees, [which] has meant that some of the economic assistance needs and financing gaps may be somewhat smaller than had initially been feared.

But our focus in the discussions on Southeastern Europe was on the question of regional integration. I was gratified by the consensus that was formed -- particularly among the European representatives -- on the importance, not just of intra-regional integration, but also inter-regional integration. It was recognized that the large market -- the large magnet -- was the European Union itself, and it was recognized that, as Southeastern Europe integrated with all of Europe, it would by nature, ipso facto, become more integrated among the different countries. And so while the discussion was certainly not anywhere near the question of dates for entry into EU, or anything of that kind, I think there was a clear commitment to promote inter-regional integration, and integration of Southeastern Europe with the European Union -- which I think was generally felt to be really the most important thing for Southeastern Europe's economic expansion. We also talked about intra-regional integration, and references were made to the importance of studying and identifying the highest priority: intra-regional projects -- bridges, airports, and the like.

Finally, we discussed the situation of Serbia and of Montenegro, and there was I think a clear commitment to provide support as rapidly as feasible for Montenegro. And I think there was a consensus on the importance of presenting the people of Serbia with a clear choice between substantial efforts to promote economic expansion and a return to economic normalcy -- after Mr. Milosevic goes -- with an assistance program that would be limited to humanitarian assistance only with respect to the most basic and urgent human needs in a context where Mr. Milosevic remained.

That's obviously something we've been talking about, a question that has been under discussion for some time. All in all, I thought it was a very useful discussion of what is going to be a continuing challenge for us all. Having created physical security, if that physical security is going to endure in Kosovo and beyond, what's crucial is that we create economic security. That was really the challenge of this meeting.

I also had an opportunity to have a number of bilateral meetings with [German Finance] Minister Eichel, with [UK Finance Minister] Gordon Brown, and with President-elect [Romano] Prodi of the European Union...  We discussed the issues that I have just been talking about. We also discussed -- I think we're very 'in sync' on the importance of maintaining growth in both Europe and the United States for the health of the global economy, and we're very much in accord on the importance of taking forward the work of the Cologne Summit on questions like debt relief, on questions of international financial architecture, as we move towards the IMF/World Bank annual meetings in September.

Let me stop there.  Questions?

Question: In your fourth point, you talked about the importance of ensuring (inaudible) to Montenegro, while limiting aid to humanitarian while Mr. Milosevic remains in power in Yugoslavia. What would be the mechanics of providing aid to Montenegro given that it remains part of this federation with Serbia?

Summers: Well, it's obviously something which will have to be worked out in detail but, presumably by working through NGOs, by providing assistance directly to particular institutions, within Montenegro, it should be possible to target assistance. Certainly with respect to Montenegro, as with respect to Kosovo, the task of assistance would be easier if and when Serbia rejoins the community of lawful nations.

Question: How will the Serbian people be made aware of this choice they'll have to make between keeping Milosevic versus dumping him and getting aid, given the controls on the media in Serbia?

Summers: That's not a question that we as Finance Ministries discussed today. I think the policy line has been a constant one, and I think there is a growing awareness of that policy line, including the President's recent press conference, and I think that awareness is coming to Serbia.

Question: Mr. Secretary, has there been any movement on deciding what kind of currency will operate in Kosovo with the (inaudible) monetary policy?

Summers: There was a discussion of the importance of satisfactory currency arrangements, but .... there was not an effort, at this meeting, to reach a decision on the exact structure. I would anticipate that in the near term, you would see European currency -- you'd see hard, convertible European currencies circulate in parallel perhaps with Yugoslav dinars.

Question: I am struck by the contrast in tone in your presentation and that of this morning -- in that, this morning, the Europeans seemed to be speaking very little about the process of institution-building, there was no reference to the idea of perhaps, some kind of new currency, and I am wondering just how far along these discussions really go, in terms of the longer-term issues of building up institutions and building up, you know, an economic structure in Kosovo...

Summers: I did not say a new currency. I said there was an agreement on the importance of having satisfactory currency and payment arrangements...and that that was a crucial issue that was going to have to be addressed quite quickly. And then I speculated that I thought for the near-term, the most likely arrangements would involve allowing hard currency to circulate freely, creating payments and clearing mechanisms for hard currency, without precluding the use of Yugoslav dinars or other currencies.

Question (continued): That was where my question was heading: if you don't have a separate country, the minute you start talking about a new currency (inaudible) it seems to me that..

Summers: ...but that's why there is no -- I mean I don't think that at least any of the near-term discussions contemplate the development of a new currency.  They involve procedures for allowing existing currencies to circulate in this area....

Question: A more basic question: the presentation this morning or the news conference this morning seemed to be, to my mind at least, focused much more on these questions of getting essential relief to figuring out what the damage assessment were, what the reconstruction bills were going to be and so forth, and much less on the question of institution-building. It was alluded to, but it was not --

Summers: You know, different people have different views. Clearly, the next stage in the work is going to be for teams from the various international financial institutions to go to Kosovo, and make various kinds of needs assessments, to anticipate, there will be a donors conference that will both look at those needs assessments and also look at questions of implementations - and so I think that -- obviously, you're going to have a situation where you're going to be assessing the needs and you're going to be arranging for the external support, but I think it's also very much the Finance Ministers' view that the lessons we had learned from the previous experiences did go also to the importance of effective implementation. But I didn't mean to minimize the fact that there is a basic process of assessing needs and arranging for external finance to correspond to these needs because, clearly there are needs that can be met only through external finance.

Question: (inaudible)....the current European currency...

Summers: I don't think there was... in the discussion. I think the Europeans made clear what had come out of the discussions they have had yesterday, their commitment to a sound currency, the belief in the importance of strengthening the fundamentals of the European economy.

Question: Yesterday, you reviewed the U.S. dollar policy and, over the past couple of days particularly Germans and Mr. Prodi have made comments that have led people to believe that they don't particularly mind the Euro weakening; is there any concern among the G-7 Ministers that there is any kind of problem with the Euro weakening?

Summers: I'd rather leave it where I did.  I think the feeling is the right focus is on the fundamentals for our economies, and I think it is understood in Europe that in terms of focusing on fundamentals, the need is to focus on stimulating domestic demand, and that energy for an acceleration in growth in Europe should come from domestic demand rather than any artificial effort to increase competitiveness -- I think that it is certainly something that feels to me like it's understood, it is the view quite widely in Europe...

Question: Would it be wrong to hold the view that the Ministers do not oppose a weaker Euro?

Summers: I think there were too many negatives in that sentence (do not oppose) for me on the number of hours of sleep I had to attempt to parse that sentence -- I think I'll leave it where I did.

Question: On Kosovo, there was a lot of grand talk about the time of the EU Cologne Summit where the peace was reached that this was going to be a European peace, it was going to be a European-led peace -- the implications was the Europeans would pay for peace. Do you sense they are backing off (inaudible)... large share of the cost... Europeans are getting more cautious about what they might be willing to spend?

Summers: This was a planning session, not a pledging session and I would say that it's our expectation [and] I think the European expectation that they will. This after all, is an issue on European soil. I think that it is their expectation that they will take the leading role and be clearly the leading providers of finance. But we've made it clear that we also are prepared to play a role as we already have with respect to humanitarian assistance; I think we'll have to see where we are when the needs are assessed because I think at this point there are very large uncertainties as to the magnitude of the needs.

Question: (inaudible)

Summers: We continue to watch the Japanese economy carefully and to believe that what's most important for Japan is the restoration of domestic demand-led growth and it is important that the basis for growth be firmly established. I may leave it at that...

Question: You said you and your colleagues on the Steering Committee had reviewed the Bosnian and West Bank experiences. What lessons do you draw (inaudible)... What has been done wrong then that has to be done differently now --

Summers: I would not put it in quite that way. I think that our sense was that one has to monitor these kinds of complex situations very carefully -- how assistance is used -- and to supervise its use in a very careful and thorough way and that the constraint is often the capacity to implement projects rather than the quantity of finance that is available. And so it's very important to focus on helping to develop the capacity to implement projects, which takes you back to some of the issues that I referred to in terms of currency arrangements and terms of the capacity to collect taxes and so forth.

Thank you.

(end transcript)

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