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Western Press Review: EU Central Banks Reduce Interest Rates

  • Elizabeth Weinstein

Prague, 4 December 1998 (RFE/RL) -- Western press commentary focuses on the unexpected interest-rate reduction announced simultaneously yesterday by the central banks of the 11 European Union nations due to adopt the new EU single currency in four weeks. The lower rate was set to boost sagging EU economic growth. Also today, debate continues on the issue of restoring Jewish property stolen by the Nazis during World War Two.

NEW YORK TIMES: Insuring against things going wrong should be the goal for policy-makers

A New York Times editorial today calls the EU interest-rate reduction "salutary," but it also warns the move signals that the economic outlook in Europe is worsening. The editorial asks how major Western economies can continue to prosper while the "rest of the world suffers."

The paper says that although the World Bank's annual report on global economic prospects --issued Wednesday (Dec. 2)-- looks encouraging, a global recession could be a possibility if the East Asian economies don't post a mild recovery next year.

The editorial concludes with a recommendation for policy-makers. It says: "The World Bank warned that a global recession next year was a possibility if things go wrong. Insuring against that possibility --through reforms in many countries and through pro-growth policies-- should be the goal for policy-makers. It is likely that the new European Central Bank, which formally takes over monetary policy in the 11 European countries that will adopt a common currency at the end of the month, will need to lower interest rates again next year."

FINANCIAL TIMES : The rate cut will help to prop up growth

The Financial Times today says the rate reduction was both "surprising and welcome." Its editorial lauds the move for paving the way for a smooth transition to the common EU currency. This is the right time for an interest-rate reduction, the paper says, because business confidence is sagging and industrial production figures are worsening. But the paper also says the rate reduction is a stern reminder that the real economic effects of the emerging markets crisis will continue well into next year.

The Financial Times also says the lower interest rates will have positive repercussions. It writes: "The rate cut will help to prop up growth, but is very unlikely to have any serious inflationary consequences. It lessens the probability of a damaging period of euro appreciation after the launch of economic and monetary union which, apart from the effect on European growth, could have been destabilizing for the global economy. And by setting an interest rate which will be expected to hold for some time, a potential source of uncertainty will be removed from the early months of EMU (EU Economic and Monetary Union, which begins Jan. 1)."

IRISH TIMES: The rate reduction will have varying effects on European economies

An editorial in The Irish Times today takes a pragmatic look at how the rate reduction will affect individual economies inside the 11-nation Euro Zone. It says the action "shows that we are now effectively inside the euro-zone and that the new single currency bloc is now acting as one in setting monetary policy."

The paper also says the reduction will have varying effects on European economies. Using the Irish economy as an example, its editorial argues that the new interest rate will only add momentum to a dangerous price spiral in the Irish housing market.

The IT concludes: "The episode illustrates the new environment facing policy-makers as we (Irish) enter the euro zone. We have lost control of interest rates policy, and budgetary policy on its own has limited effectiveness in managing the overall level of economic activity. Much greater effort must thus be put into making the economy more efficient and effective. This can be done through the continuation in the years ahead of the kind of tax-cutting measures seen in the (Irish) budget --aimed at making it more financially attractive to work --and by examining new ways to tackle the overheating in the housing sector and in parts of the jobs market."

TIMES: Membership in the EMU means living with its monetary policies

A last commentary on the interest-rate reduction comes from Mary Ann Sieghart in today's Times of London. In a commentary entitled "You Can't Have It Both Ways, Tony," she says Prime Minister Tony Blair cannot promote British membership in the euro while down-playing economic integration. Sieghart writes that other EU countries have done Britain a favor by showing the "absurdity" of the Government's position.

Sieghart writes: "Until now, those of us like George Soros, who claimed that harmonization of interest and exchange rates would lead inevitably to harmonization of taxes, have been dismissed as paranoid or scare-mongering. Now our logic has been confirmed. Britons can have a debate about what EMU entails before they join, rather than finding out afterwards when it is too late."

She also says that membership in the EMU means living with its monetary policies, and warns that Blair must know that if he "tiptoes too close to the integrationist quicksand, he will be sucked in."

Sieghart concludes by saying Blair is in a precarious position: "Mr. Blair is a man who likes to please others," she writes. "He wants to be liked by his European partners; he also needs to be liked at home....This week must surely have taught him that the two are incompatible. He can please Europe if he wants; but the British people will show their displeasure in return."

SUEDDEUTSCHE ZEITUNG: The 11 principles adopted in Washington are not binding

In other commentary today, Josef Joffe of Germany's Sueddeutsche Zeitung discusses the complex problem of tracking down valuable artworks stolen by the Nazis during World War Two. Yesterday marked the close of an international conference on Holocaust-era assets in Washington.

One major concern for the 44 countries represented was the opening of relevant archives in those nations still possessing looted property. Joffe says that opening of archives "would enable the creation of an international register (and constitute) the first and most important step" in the restoration of stolen goods. Then, owners or heirs can then register their claims.

But Joffe warns that the 11 principles adopted in Washington are not binding and could lead to trouble. He offers an example: "In the United States, there is no statute of limitation on art theft. A buyer there never knows if he or she has a water-tight claim on the work. In Europe on the other hand, any stolen property is safe from being returned to its rightful owner if the purchaser can prove it was bought in good faith."

Joffe uses the example of Paris' Orsay Museum display of Cezanne's painting, "The Bathers." The World Jewish Congress says the painting --never claimed by the original owner or his family-- was stolen and should be auctioned to benefit a compensation fund. But the French Government rejects the argument, saying it can't sell something which doesn't belong to it. Joffe says these sorts of binds will be the "center of copious argument" for years to come.

WASHINGTON POST: It should be beneath the dignity of the Jewish people to accept money, let alone seek it

Another commentary on Holocaust assets comes from Charles Krauthammer in the Washington Post. He argues that the pursuit of thousands of millions of dollars in what he calls Holocaust "guilt money" has gone "from the unseemly to the disgraceful." Krauthammer says that the flood of personal-injury lawyers and class-action specialists grappling to get lost funds for Holocaust victims is turning into an industry.

He writes: "What is happening is that the lawyers and community bureaucrats will reap the power and the payoff that comes from collecting in the name of those whose names are forever lost. They risk causing, to borrow a phrase from Abe Foxman of the Anti-Defamation League, 'an industry to be made on the memory of victims.'"

Krauthammer also says that the only thing certain to come out of the "scramble for money" is a revival of "(anti-Semitic) stereotypes." He concludes: "Should we find out and proclaim the truth about Holocaust looting? Of course. And truth about the forced labor. And truth about the industrialists who abetted the Nazi machine. And truth about the peoples of Europe who were silent --or worse. But money? It should be beneath the dignity of the Jewish people to accept it, let alone seek it."