Louvre Accord
Encyclopedia
The Louvre Accord was signed by the then G6
(France
, West Germany
, Japan
, Canada
, the United States
and the United Kingdom
) on February 22, 1987 in Paris
, France. Italy
had been an invited member, but declined to finalize the agreement. The goal of the Louvre Accord was to stabilize the international currency markets
and halt the continued decline of the US Dollar
caused by the Plaza Accord
(of which a primary aim was depreciation of the US dollar in relation to the Japanese yen and German Deutsche Mark by the mutual agreement of the G7 Minister of Finance meeting (i.e. a conference of ministers of the "group of seven") that had been held in Louvre in Paris in 1987. Since the Plaza accord, the dollar rate had continued to slide, reaching an exchange rate of ¥150 per US$1 in 1987. The ministers of the G7 nations gathered at the Louvre in Paris to "put the brakes" on this decline.
France agreed to reduce its budget deficits by 1% of GDP and cut taxes by the same amount for corporations and individuals. Japan would reduce its trade surplus and cut interest rates. Great Britain would agree to reduce public expenditures and reduce taxes. Germany, the real object of this agreement because of its leading economic position in Europe, would agree to reduce public spending, cut taxes for individuals and corporations, and keep interest rates low. The United States would agree to reduce its fiscal 1988 deficit to 2.3% of GDP from an estimated 3.9% in 1987, reduce government spending by 1% in 1988 and keep interest rates low.
G8
The Group of Eight is a forum, created by France in 1975, for the governments of seven major economies: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. In 1997, the group added Russia, thus becoming the G8...
(France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, West Germany
West Germany
West Germany is the common English, but not official, name for the Federal Republic of Germany or FRG in the period between its creation in May 1949 to German reunification on 3 October 1990....
, Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
) on February 22, 1987 in Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
, France. Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
had been an invited member, but declined to finalize the agreement. The goal of the Louvre Accord was to stabilize the international currency markets
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
and halt the continued decline of the US Dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
caused by the Plaza Accord
Plaza Accord
The Plaza Accord or Plaza Agreement was an agreement between the governments of France, West Germany, Japan, the United States, and the United Kingdom, to depreciate the U.S. dollar in relation to the Japanese yen and German Deutsche Mark by intervening in currency markets...
(of which a primary aim was depreciation of the US dollar in relation to the Japanese yen and German Deutsche Mark by the mutual agreement of the G7 Minister of Finance meeting (i.e. a conference of ministers of the "group of seven") that had been held in Louvre in Paris in 1987. Since the Plaza accord, the dollar rate had continued to slide, reaching an exchange rate of ¥150 per US$1 in 1987. The ministers of the G7 nations gathered at the Louvre in Paris to "put the brakes" on this decline.
France agreed to reduce its budget deficits by 1% of GDP and cut taxes by the same amount for corporations and individuals. Japan would reduce its trade surplus and cut interest rates. Great Britain would agree to reduce public expenditures and reduce taxes. Germany, the real object of this agreement because of its leading economic position in Europe, would agree to reduce public spending, cut taxes for individuals and corporations, and keep interest rates low. The United States would agree to reduce its fiscal 1988 deficit to 2.3% of GDP from an estimated 3.9% in 1987, reduce government spending by 1% in 1988 and keep interest rates low.