Global response to Asian turmoil necessary to protect world prosperity

United States Treasury Secretary Robert Rubin yesterday answered critics at home and in Asia, saying the international bailout of troubled economies was essential to protect world prosperity.

In the administration's broadest defence so far of its role in helping the International Monetary Fund restructure the Asian nations, Mr Rubin said: 'To do nothing would lead to far deeper and longer financial instability and economic distress.

'We cannot afford to stand back and gamble that the crisis will resolve itself.' Mr Rubin also criticised the weak financial systems that led to the collapse of currencies and markets in Indonesia, Thailand and South Korea, and urged the nations to abide by the IMF's strict reform regime.

He also said the increasing globalisation of capital markets required a 'new, modern architecture' to address the problems thrown up by the interdependence of world economies.

Mr Rubin said private financial institutions had 'an important role to play in solving these problems.

'In the case of Korea . . . we stated that the United States would provide funds [through an IMF rescue plan] only in the context of international banks addressing Korea's immediate financing needs.' Mr Rubin said a meeting of world finance ministers would take place this spring to hash out ideas for shoring up the world's shaky financial systems.

The conference, proposed by US President Bill Clinton at November's Asia-Pacific Economic Co-operation (Apec) forum in Vancouver, will focus on improving financial transparency and assessing the role of international institutions such as the IMF.