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Western Press Review: Economic Threat Spreads Wide Cloud

By Don Hill and Annie Hillar

Prague, 7 September 1998 (RFE/RL) -- Last year's Asian economic crisis has become this fall's world economic turmoil. A continuing wave of worrisome economic events has concentrated the attention of the Western press.

LOS ANGELES TIMES: The Asian economic crisis has now gone global -- officially

Here's how Los Angeles Times commentator Art Pine put it this weekend: "The fast-spreading Asian economic crisis formally entered a new phase this weekend: It now has gone global -- officially.

"When the crisis broke out -- with the collapse of Thailand's economy in July 1997 -- conventional wisdom held that the damage would be confined to a handful of small Asian economies. America would help, but was unlikely to be affected. For months, it seemed that the United States would be immune.

"On Friday, however, Federal Reserve Board Chairman Alan Greenspan effectively conceded that the Asian crisis has proved to have had a much more significant reach than first anticipated. In comments at the University of California, Berkeley, Greenspan's disclosure that the U.S. central bank is prepared to cut interest rates if necessary to help calm the turmoil in global markets marked the first concession by a top U.S. policy-maker that the crisis is jeopardizing the U.S. economic boom.

"But the question remains whether the United States and the other major industrial nations can muster the wherewithal to prevent the current crisis from dragging the world into a recession -- or worse yet, a 1930s-style depression that could continue for years."

FINANCIAL TIMES: Mr. Greenspan is thinking of darker possibilities

In London, the Financial Times comments editorially today on the Greenspan speech, saying that the speech demonstrates U.S. involvement and exposure to the economic threats. The editorial says: "(Greenspan) keeps his cards close to his chest. But his observation that the (United States) cannot 'escape increased stress' sounded a salutary warning. It is obvious that the United States cannot escape the crisis in world financial markets unscathed. The significance of Mr. Greenspan's words is the shift they signal in the Fed's thinking. This is welcome."

The editorial concludes: "With U.S. savings so low, and consumption sustained in good part by stock market gains, a continuing slump on Wall Street will slow growth as well as inflation. If this proves to be a correction, the Fed's task will become easier. But Mr. Greenspan's speech shows he is thinking of darker possibilities that would require prompt and decisive action."

SUEDDEUTSCHE ZEITUNG: Europe has its tranquillity under the present circumstances

As the British newspaper writes the United States into the trouble script, a German newspaper writer forecast a smoother role for Europe. Nikolaus Piper wrote this weekend in the Sueddeutsche Zeitung: "In the eye of the storm hitting the world economy, there is only one tranquil place: Europe. The economy is recovering and the participants of the future monetary union are regarded as a safe haven for investors. This can be seen from the decline of the dollar which on Thursday was worth only 1.73 marks.

"But this tranquillity does not mean that the Europeans will remain unscathed by the crises in Asia and Russia. Because of the collapse in Asia, the rapid growth in exports which carried the upward economic swing is at an end. And the drawn-out political chaos in Moscow will not be without its effect on the investment climate in Germany and its neighboring countries. So does this mean that the start of European monetary union is in danger?"

The writer said: "The fact is that neither Russia nor Asia represents a danger for the euro. On the contrary, Europe has its tranquillity under the present circumstances at least partly because European currencies are today de facto closely tied to each other."

LES ECHOS: The solution resides in abandoning sovereignty to the hands of enlightened authorities

France's economic daily, Les Echos, editorializes today that the root of the problem is the globalizing national economies, and therein also lies the solution. It says: "The monetary and financial shipwreck of the Asian continent was followed by that of Latin America, then Russia. Who will it be tomorrow? Only the member states of the EU and the United States are resisting."

The editorial says: "Financial globalization has taken place while competent international institutions had neither the power nor the means to impose a code of conduct."

It goes on: "If one is inspired, one sees that the solution resides in abandoning sovereignty to the hands of enlightened authorities, (since) only international financial institutions possess the objectives of oversight, of counsel and aid. But they do not have the power to coerce. It would be a political decision for states to accept seeing their actions controlled by an independent central bank. If the origins of the process reside in a search for stability of economic rules, this dynamic will emerge early or late, like what is happening in Europe right now. If that is the price for maintaining liberty and bringing about peace, then the bet is worth taking."

NEW YORK TIMES: Chernomyrdin's plan comes dangerously close to incoherence

The New York Times looked this weekend at economic rescue proposals by Russian prime minister-nominee Viktor Chernomyrdin, and reacted pessimistically. The Times said: "Desperate political circumstances help explain the contradictory economic program proposed Friday by Russia's acting prime minister, (but) it is hard to imagine how its successive phases of hyper inflationary expansion and ironclad austerity could possibly work. Russia needs daring economic boldness. But this plan comes dangerously close to incoherence. The initial, expansionary measures reflect Chernomyrdin's urgent need for support from Communist and other anti-reform members of Russia's parliament when his nomination as prime minister comes up for a second confirmation vote next week."

The U.S. newspaper says: "But if Chernomyrdin's new program is the price he has to pay for (a hope of) stability, it is alarmingly high. Urgently needed reform measures are pushed back for at least four months, until next January. There can be no confidence he will be able to muster sufficient political support to proceed even then.

It concludes: "The program also promises that inefficient companies will be forced into bankruptcy and that the tax system will be reformed. These are exactly the kind of measures that could do a lot of good right now. What will happen in January is anybody's guess."

EL MUNDO: The best recipe is to accentuate a politics of cooperation

Madrid's El Mundo laments what it calls a U.S. isolationist tilt at a time when worldwide economic leadership is needed. The Spanish newspaper editorializes today: "The best recipe to avoid at all costs an unprecedented global economic cataclysm is to accentuate a politics of cooperation, which distances developing countries from isolationist tendencies like what has begun to happen in Malaysia with its impeding exit of capital. From that point of view it is, for example, unacceptable that the United States continues to deny the funding the International Monetary Fund is asking for."

El Mundo says: "We are, definitively, facing a trial by fire of the capacity for leadership by the great governments of the planet. And, disgracefully, it is on that front that we have the least reason to be optimistic."

NEWSDAY: The real concern is the security of Russia's immense arsenal of nuclear weapons

Stansfield Turner, a retired admiral and former director of the U.S. Central Intelligence Agency, wrote this weekend in the U.S. newspaper Newsday that severe financial and social collapse in Russia might be a mild precursor to a terrible worldwide nightmare. He wrote in a commentary: "More value was lost on the New York Stock Exchange last Monday than the Russian economy produces in 10 years. Russia's economic troubles certainly played a role in triggering the Wall Street correction. But, to put it in perspective, it's important to remember that Russia's entire economy is roughly the size of Illinois'. From a purely American standpoint, the real concern in Russia's domestic crisis is not how it affects the economy, but how it affects the security of her immense arsenal of nuclear weapons.

"If the Russian Federation broke up, as some fear, to whose control would its members gravitate? Or if the central government hangs on but cannot pay troops to guard them, will Osama bin Laden be able to purchase a suitcase-sized bomb or two? These have become less unthinkable nightmare scenarios and more serious questions in recent weeks."