European finance ministers lobby ECB for interest rate cut

Section:

2:50p PT Saturday, January 24, 2004

Dear Friend of GATA and Gold:

Appended here and in the following dispatch is some
pretty good reporting by Reuters about this weekend's
meeting of the World Economic Forum in Davos,
Switzerland, and concerns about the euro's
appreciation against the dollar.

The reporting is especially interesting for its comments
from people who say they want free markets to determine
exchange rates even as they are contemplating or even
scheming to prevent exactly that.

The decline and possible crash of the U.S. dollar are
openly addressed here, as well as a reduction in euro
interest rates.

In free markets all of this would be instantly electric
for gold and silver, since they are currencies too. In
less than free markets it may take a little longer. In
the meantime, how can anyone notice all the currency
intervention going on and not suspect that it
surreptitiously may encompass gold and silver as well?

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Global business leaders fret about growth

http://www.reuters.com/newsArticle.jhtml?
type=topNews&storyID=4200535&pageNumber=1

By Stella Dawson

DAVOS, Switzerland, Jan. 24 (Reuters) -- Tepid optimism and gnawing
concerns.

This is the state of mind of a number of global business leaders and
policy makers gathering at this ski resort for the annual World
Economic
Forum meeting of the rich and powerful.

While noting that a recovery is slowly underway, they remain
concerned
about Europe's struggling economy, a spendthrift United States, and a
burgeoning Chinese economy. But most of all, what concerns many of
them is the possibility of the dollar crashing. All these factors,
they say,
darkens the global economic outlook and could upset recovery in 2004.

"I am optimistic but I am worried. I am concerned," said Stephan
Newhouse, president of investment banking giant Morgan Stanley
USA.

For several years the United States has driven recovery worldwide.
"That is not sustainable. That is a big question for me," he said.

If the United States stumbles, the global engine sputters.

The global economy is expected to expand by 3.5 percent in 2004
-- its fastest pace in several years, according to United Nations
forecasts. But it is very lopsided.The United States is sucking in
imports from all over the world, driving up the U.S. current account
deficit as Americans borrow heavily. This, combined with the huge
U.S. budget deficit, is forcing down the value of the U.S. dollar in
currency markets.

The euro is bearing the brunt of the dollar's fall, rising 20 percent
last year.

Meanwhile, Asian countries, especially Japan and China, are
keeping their currencies artificially weak to compete in global
export markets, fueling concerns of a dollar crash.

Europe already is feeling the pain, said French Finance Minister
Francis Mer.

"The value of the currency for some corporations presently starts to
be endangering the potential growth of results. It is a fact," Mer
told
Reuters.

Mutual fund companies are worried too. "What do I say to investors
with their assets, their savings, in U.S. dollars? How can they
protect
themselves?" said Prakash Hinduja, European president of Hinduja
Group of Companies, a financial services company with clients in
India, Germany, and Switzerland.

It's a question of how to get more balanced global growth -- a
challenge that confronts finance ministers and central bankers from
the Group of Seven rich nations when they meet in Florida in two
weeks.

Deputy German Finance Minister Caio Koch-Weser told Reuters
these issues are firmly on the G7 agenda. "Clearly the euro should
not bear the burden of external imbalances," he said.

But finding a solution is far more complex than in the 1980s, when
G7 finance ministers engineered an end to dollar declines.

"We have new players who increasingly play a role here -- China
and its links with east Asian economies," said Koch-Weser.

China does not attend G7 meetings, but is essential to the
solution. Its currency is pegged to the U.S. dollar, and both the
United States and Europe want the yuan revalued to take some
of the pressure off the euro and to stop undermining U.S.
manufacturing.

But Zhu Min, general manager and adviser to the president of the
Bank of China, told Reuters not to expect a shock-therapy
revaluation any time soon. China might adopt a narrow currency
band of 0.3-2.5 percent, he said, but gave no time frame.

This adds up to no big solutions at the G7 meeting, said Alan
Blinder, former U.S. Federal Reserve vice president and economics
professor at Princeton University. In a U.S. presidential election
year, the U.S. economy benefits from a weak dollar, so major
changes in U.S. policy are not expected.

"It is going to be difficult" and dangers are mounting for the world
economy, Blinder said.

But he expects slow reforms to avert crisis: Europe loosening its
regulations to make labor and products more competitive and
boosting domestic demand; China slowly opening up its
economy; the United States after the election to start taming its
massive deficits. "If you are content with snail's pace, then
changing is moving ahead already, very, very slowly at a slow
burn," he said.

(Additional reporting by Lucas van Grinsven, Thomas Atkins, and
Knut Engelmann.)

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