http://dailynews.yahoo.com/h/ap/20010423/bs/germany_economy_1.html

http://dailynews.yahoo.com/h/ap/20010423/bs/germany_economy_1.html

Monday April 23 7:58 AM ET

German Business Index Declines

FRANKFURT, Germany (AP) - A leading measure of Germany's business climate released Monday indicated Europe's economic motor is continuing to sputter and undermined recent arguments that the region has yet to feel the effects of a global slowdown.

The index, which measures western German business sentiment, is produced by the esteemed Ifo Institute think tank and showed that business confidence continued to decay in March after taking a big plunge in February.

The Ifo index fell to 93.9 in March from 94.9 in February, in line with market expectations. The 1 point decline is mild compared with the 2.5-point drop in February.

The Ifo index has been on a clear downward path since May 2000, leading many economists and business leaders to push for an interest rate cut in Germany and the other European countries using the euro common currency.

Lower interest rates make it cheaper for companies to borrow money to fund expansion.

A slowdown in the economy here could spell troubles for the 11 other countries using the euro because Germany accounts for nearly 35 percent of the region's economic output.

In midday trading, Germany's DAX was off 55.91, or 0.9 percent, to 6,072.06.

News of a continuing German slowdown comes just days after Europe's top economic ministers downplayed the spillover effects of the stumbling U.S. economy at a weekend summit in Sweden.

European Central Bank president Wim Duisenberg, who has resisted persistent calls to cut interest rates, said the U.S. slowdown would have only ``limited'' effect on Europe because the United States accounts for only 3 percent of external trade of the European Union (news - web sites).

German Finance Minister Hans Eichel also called the impact of the U.S. slowdown ``minor.''

On Wednesday, the EU head office is expected issue a forecast putting economic growth in the EU in 2001 at between 2.5 percent and 3.0 percent, down from a forecast of 3.2 percent made last fall.

Forecasts peg U.S. growth to be about 2.5 percent this year.

European Commission (news - web sites) President Romano Prodi said since the EU anticipates more robust growth than the United States, ``we are really stressing the resilience'' of the EU economy.

-- (M@rket.trends), April 25, 2001

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Tuesday April 24, 11:35 am Eastern Time

IMF's Koehler-World economy at critical juncture

By Mark Egan

WASHINGTON, April 24 (Reuters) - The head of the IMF said on Tuesday the global economy was at a critical juncture but decisive action from the U.S. Federal Reserve, and hoped-for interest rate cuts in Europe, should prompt a rebound in economic growth in the second half of this year and into 2002.

In an interview with reporters ahead of the International Monetary Fund's spring meetings, IMF Managing Director Horst Koehler said that while there were elements of ``uncertainty'' and ``unpredictability'' to the U.S. economic outlook, there was a ``good degree of probability'' that the U.S. rebound will materialize.

``The world economy is certainly in a quite critical phase,'' Koehler said.

``There is a deceleration of economic activity in the United States, which is stronger and faster than most had expected a month ago, and there is no region all over the world which (is) taking up the slack which means there is a slowing down of the global economy,'' he said.

But despite the dark prospects, the German remained upbeat, saying he felt it wrong to ``paint everything in negative terms or colors.'' Indeed, Koehler said that while business confidence was hurt in the United States, consumer confidence, automobile sales and home sales were still strong.

``I have no doubt that with the right policy response the global economy will recover at the later part of this year and 2002,'' Koehler said. ``This includes clearly the U.S. economy and I must express my appreciation for the decisive action, particularly the U.S Fed, has taken.''

Just last September the IMF had forecast that the world's richest economy would grow by 3.2 percent in 2001. But in recent months the U.S. economy has slowed dramatically and the IMF is expected to forecast U.S. growth for this year of just 1.5 percent when it publishes its economic forecasts on Thursday.

In response to that slowdown, the U.S. Federal Reserve has slashed interest rates by two full percentage points to try to reignite growth in the economy, which has expanded for an unprecedented decade.

While Koehler was fulsome in his praise of the U.S central bank, he was less effusive about European counterparts. Nevertheless, he said the global rebound was possible if the right policies are enacted, particularly in Europe.

The head of the global lender said the IMF would like the European Central Bank to cut interest rates there, to boost prospects in Europe and globally. While he said he hoped to reach a ``common understanding'' with European officials this weekend about the need for lower interest rates, he stressed that he respected the central bank's independence.

On Japan, Koehler said growth would be lackluster this year and said that corporate and bank restructurings should be a key priority. Koehler said he looked forward to working with a new Japanese government and urged the Bank of Japan to press ahead with a rapid monetary easing.

Koehler said that the world economy was more resilient now and thus more able to weather a slowdown than it was just three or four years ago. On Argentina, which is embroiled in a financial crisis, he said Economy Minster Domingo Cavallo should set out a more specific policy agenda to help rebuild confidence and foster growth there.

-- (M@rket.trends), April 25, 2001.

http://www.abc.net.au/ra/newsdaily/s282728.htm

http://www.abc.net.au/ra/newsdaily/s282728.htm

Argentina's economic crisis hits neighbours

Argentina's deepening economic crisis is beginning to damage neighbouring economies and has sparked fears of a wider regional crisis that could involve the United States.

Latin America correspondent Neil Weise reports.

Mexico's peso has slumped and Brazil and Chile's currencies have hit record lows as investors worry about Argentina's capacity to meet a foreign debt repayment of 22 billion dollars American. International investors aren't interested in further lending to a nation with half its GDP absorbed by foreign debt.. and domestic investors are demanding 15% interest which the government says it can't afford.Argentina has suspended a government bond auction today - sending shockwaves through international emerging markets.A number of analysts say Argentina's crisis could trigger a hemispheric-wide market collapse without warning and US president George W Bush says Washington is monitoring the crisis "closely".

(15:57:59 AEST)

-- (M@rket.trends), April 26, 2001.