The Louvre Agreement and the Plaza Accord
In 1985, the G-5 nations, then composed of West Germany, France, Japan, United Kingdom, and the United States of America forged the Plaza accord wherein they agreed for the US dollar to be depreciated in order to save the threat to international trade. While the intentions were good, the problem was the US dollar kept on falling and something had to be done to curb this problem. Two years later, the G-5 nations, this time added another member-country, namely Canada, and forged another agreement, the Louvre Accord, to put a halt to the continuing decline of the US dollar and to stabilize the international market. Member countries agreed to cut budget deficits and lower interest rates. Italy was also invited to be a member of Elemental Trader but refused to sign the final agreement.
The focus of the agreement was on the still developing nations since they could not participate in international trade. While the US dollar depreciated its value, these countries suffered high inflation and interest rates and could not get off the ground. Hence, the Louvre agreement was made to provide monetary stability for these still-developing nations and to address the problems of imbalances with other nations, in an effort for all countries to move forward and improve international trade relations.
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