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Western Press Review: The Fall Of The Dollar, Middle East Peace, And U.S. Involvement In Iraq And Afghanistan

Prague, 21 May 2003 (RFE/RL) -- It is still the economy that is claiming most attention from Western press commentators today. The Middle East, Iran, and Iraq also attract discussion.


Britain's "The Times" editorializes today that only simple-minded European politicians are pleased that the euro currency has gained great strength against the dollar. "Far from hurting America, in fact, the falling dollar seems to pose a much greater threat to those euroland economies," the editorial says. "Several countries have chronic unemployment problems, which are likely to get worse. And leading European companies, ranging from the French defense firms to German car manufacturers have blamed relatively poor figures on the weak dollar."

The editorial continues: "The apparent inability of the European Central Bank to see this threat coming -- the equivalent of the elephant in the living room -- is one more reason that U.K. Treasury officials may feel reluctant to cede control of British monetary policy [that is, join the euro-zone]. The Stability Pact prevents members of the euro-zone from responding to the threat of the falling dollar by reducing interest rates or borrowing to accelerate growth. It is hard not to conclude that the Federal Reserve is currently being run more intelligently than the European Central Bank."


The "Financial Times" concurs. It says in an editorial: "If recent trends continue, the economic fallout should not be underestimated. U.S. goods would become more competitive than [those of] their euro-zone counterparts in all markets, reducing profit margins of European companies and demand in euro-zone economies.

"The authorities' benign neglect of the dollar's fall therefore borders on reckless behavior. Attempts to prevent its fall would probably be futile, given the huge U.S. current account deficit. So offsetting measures are vital. The European Central Bank must loosen monetary policy now; and Asian economies with strong demand growth should allow their currencies to appreciate against the dollar. The latter would at least mean that Europe is not bearing the whole burden of adjustment. Those in positions of power still express strong resistance to either move. The dollar's downward dance gets ever more dangerous."


Economics commentator Robert Samuelson makes the same points from the perspective of the other side of the Atlantic. He writes in "The Washington Post" that the dollar's slide could eventually weaken foreign economies dangerously.

Samuelson comments: "There's another danger: a big foreign withdrawal from U.S. stocks, which could hurt the market or even trigger a panic. At the end of 2002, foreigners owned almost 12 percent of U.S. stocks, up from 7 percent in 1990. As the dollar drops, these stocks become worth less in foreign currencies -- even if stocks aren't declining. Fear of further losses could cause foreigners to sell, depressing stocks and the dollar. Of course, a slumping stock market would also damage the U.S. economy. It would subvert confidence and, possibly, consumer spending.

"The administration's dollar gamble is that the American and world economies can escape the present disequilibrium without encountering these perils, or others. The others include a resurgence of economic nationalism, as countries resort to protectionism to safeguard jobs and production from global gluts."

Samuelson concludes, "If a cheaper dollar rescues the American economy while plunging the rest of the world into recession, the triumph could be short-lived."


European economist Han-Werner Sinn writes in the "Financial Times" that the European Central Bank should cease to seek a 2 percent ceiling on euro-zone inflation rates. The writer says: "This month's long-awaited revision of the European Central Bank's [ECB] inflation target was a disappointment. Although the ECB paid lip service to greater tolerance of inflation, nothing has really changed. The ceiling for euro-zone inflation will remain at 2 percent. This is bad news for euro-zone countries, because they need a dose of inflation to get moving again."

Sinn continues: "This adjustment in relative prices is a natural and desirable process that the ECB's monetary policy should tolerate, especially as it is advanced by the euro. The euro led to a convergence of interest rates in Europe and has lowered the real cost of capital in soft-currency countries that previously had to pay high risk premiums with their interest rates. For this reason the euro is stimulating investment in these countries, supporting real growth, boosting wages and increasing the rate at which prices are converging."

He concludes: "The ECB should set an inflation ceiling of 2.5 percent until euro-zone convergence is concluded, at the same time ensuring that no country falls to very low inflation levels, say, below 1.5 percent. It should pay particular attention to the inflation floor, because deflation or low inflation in single countries would pose great dangers to the stability of the European economy."


An editorial in "The New York Times" describes the dollar's slide as a symptom of diminishing influence of the U.S. Treasury in the nation's economics and of the United States in the world's. "The extent of the dollar's decline to date certainly amounts to a vote of no confidence in America's future prospects -- it isn't as if Europe is attracting investment on its own merits," the editorial says. "And an acceleration in our currency's decline would be a far greater threat than an overvalued dollar in light of our nation's reliance on huge net inflows of capital. This reliance will only grow with [U.S. President George W.] Bush's deficit-raising tax cuts.

"Cutting taxes in the face of rising deficits is the crucial factor behind the lack of confidence in the dollar, and indeed in the American economy. It is one thing for President Bush to travel around the country, repeating at pep rallies that unaffordable tax cuts will create jobs and prosperity. It is quite another for his Treasury secretary to make the same case with a straight face to his fellow economic ministers around the world. The real issue here is not a devalued dollar, but this administration's devalued credibility to lead on global economic issues."


Turning to the Middle East, "The New York Times" says in an editorial that U.S. President George W. Bush should wade personally into the crisis there. "Israelis buried the victims of the latest terrorist outrage yesterday while Palestinians stayed sealed off in their towns and villages, each side seething with resentment and despair," the editorial says. "This may seem like the least likely moment to move forward on Middle East peace. But it is precisely the time for President Bush to increase his involvement. He has been saying the right things, and he took a small but significant step yesterday when he telephoned the new Palestinian prime minister, Mahmoud Abbas, for their first conversation. He also called Ariel Sharon, the Israeli prime minister. Far more is needed."

The editorial adds: "Mr. Bush should encourage negotiations by inviting both leaders to the White House. Mr. Sharon postponed his visit because of the attacks, but he should come soon. Al-Qaeda and its affiliates are reconstituting themselves. The last thing the world needs is for them to conquer more Palestinian hearts and minds."


The "Chicago Tribune" calls for the United States to press Israeli Prime Minister Ariel Sharon to agree to the recently unfolded international peace plan -- the "road map" -- and for Russia, the European Union, and the UN to bring pressure on Arab interests to isolate Palestinian terrorists.

The newspaper says in an editorial: "Even in a patch of earth so often drenched with blood, the five suicide bombings in the Middle East in a span of 48 hours are a cruel shock.

"It's no secret [that] Palestinian terrorists want to extinguish Israel and, more immediately, snuff out the road map to peace offered by the Bush administration. Some of the attacks took place while Israeli Prime Minister Ariel Sharon was meeting with Mahmoud Abbas, his Palestinian counterpart.

"Sharon responded to the terror by canceling a trip to Washington scheduled for this week. He was to meet with President Bush to present a list of some 15 Israeli objections to the peace plan, which also is sponsored by the other members of the so-called Quartet -- the United Nations, the European Union and Russia. Sharon has not yet accepted the road map, and his next step could be to toss it aside."

The editorial continues: "The other members of the Quartet must now become the force that eliminates the terrorists' veto. They must bring pressure on Iran, Syria and other nations that actively or tacitly support Palestinian terrorism. They must isolate the terrorist organizations that thwart peace. It is unlikely that the newly selected Abbas can get enough political traction among his own constituents to marginalize the criminals and lunatics in his camp. Russia, the EU and the UN must do everything in their power to assist him.

"The Americans ought to press Sharon to sign on to the road map. But the other Quartet partners must pursue the peace agenda with Arab states -- and pursue the eradication of Palestinian terrorists who intend to do everything possible to stop any movement toward peace."


Columnist James Carroll, writing in "The Boston Globe," says that Israel deserves the criticism it gets for many of its policies in the Palestinian territories. But, he said, resurgent anti-Semitism taints the criticism. "Criticism of Israel increasingly is animated by anti-Semitism. This shows up most obviously in some Arab countries, but also in Europe and America, where political criticism of the Sharon government morphs into transcendent scorn."

The writer says: "Anti-Semitism is back, and perhaps not surprisingly. Despite the American government's disclaimers, the war on terrorism, with its subset war against Iraq, has been cast, alas, as a momentous conflict between 'the West and the rest.'"

He concludes: "The flip side of a massive assault against an enemy outside is paranoid fear of an enemy inside, and in Western civilization the enemy inside par excellence has been the Jew. To be aware of this twin dynamic is to be alert to its grave danger, which is the first step in finally defeating it."


Iraq commentary figures prominently today in many leading German newspapers. Rainer Hermann writes in the "Frankfurter Allgemeine Zeitung" that discussions in the UN Security Council comprise "an uncertain new beginning."

Hermann says: "The contours of a new order in Iraq are still vague. It is uncertain how long the Americans are due to stay in Iraq and what aims they are pursuing, what kind of state forms should be asserted and whether Iraq will maintain its present frontiers. For a new beginning much depends on the neighboring states. The attitudes of ethnic and religious groups will play a decisive role depending whether they are prepared to find compromises."

The writer concludes: "The United States is faced with a dilemma. It will have to withdraw its troops soon to avoid being labeled as an occupation force. But to prevent Islam from filling the vacuum, following the fall of the Baath regime, they will have to stay longer. Otherwise a repetition of the situation in Iran after the Shah's demise may easily occur."


In "Die Welt," commentator Dietrich Alexander defends the U.S. position in the UN as it urges a new resolution in the Security Council to lift sanctions in Iraq and determine that country's future.

He writes: "The United States is no hyperpower with corresponding hubris as regarded by its most forthright critics. America is far more concerned with establishing a consensus in the world community rather than pursuing an isolationist, unilateral policy. This might be termed pragmatism, but in any case it demonstrates that Washington does not want to rule the world alone, but is searching for partners and is prepared to meet them half way."

The writer adds: "Having burnt its fingers once before going to war in Iraq, the U.S. is striving anew for cooperation and legitimacy. This must be regarded as an opportunity, because for the victorious power to again play a solo role in Iraq would degrade the UN to a static organization and deprive it of every chance of exerting influence and developing a postwar order in Iraq."


In the U.S. press, "The Boston Globe" says in an editorial that many Iraqis suspect that America attacked Saddam Hussein in order to seize Iraq's oil reserves and to dominate in the Persian Gulf region.

The newspaper also says, "For the sake of Iraq's future and America's standing with the Iraqi populace, nothing is more important now than disproving a second common assumption: that Washington actually wanted life to become unlivable for Iraqis, so that they would become utterly dependent on the American conquerors."

The editorial says: "There are 22,000 U.S. troops on their way to Baghdad to supplement 49,000 that are there now. No matter how much the military dislikes police work, those soldiers must enforce order and provide security. As soon as possible, they should be reinforced by security forces from other NATO countries and, if possible, from the Muslim world. And the United States has to begin immediately transferring authority to an interim Iraqi administration of some sort, to show Iraqis that Americans did not come to their country as colonialists."


Commentator and scholar Abbas Kelidar comments on postwar Iraq in "The Daily Telegraph" under the headline: "Iraq Must Not Be Allowed to Split Along the Sunni-Shia Divide."

He says: "Paul Bremer, the interim allied viceroy, has a daunting task. His predecessor, Jay Garner, proved inept. [Garner's] informal backslapping style was incomprehensible to most Iraqis, who possess a self-inflated sense of dignity, and he betrayed a lack of resolve and authority.

"Bremer has had a better start. His initial statement on de-Ba'athification has received universal appreciation, as has his assurance that an Iraqi interim government, rather than an allied authority, will be established soon. However, his greatest challenge is not to create a democracy but to restructure the government of Iraq on a pluralist basis."

The writer says, "Lack of civil society may lead the Shiites to vote en masse in accordance with their sectarian affiliation -- rendering them a permanent majority pitted against competing minorities."

He continues: "Both the coalition and Iraqis must guard against a situation where force of numbers, as opposed to force of arms, is deployed in the legitimation of power. Force, whatever its nature, gives no legitimacy. Iraqis must be only too aware that the transformation of majority and minority into national fixtures of their politics would be fatal to the very idea they have been fighting for: government by consent and the rule of law."


The "Chicago Tribune" urges in an editorial, "Don't Forget Afghanistan." The editorial says: "There is a danger that as concern grows over disorder in Iraq, Afghanistan will be allowed to slip further back on an ever-growing list of national priorities. At least one Afghan official has warned that the country could become a narco-terrorist state if more aid isn't forthcoming. Even though a far bigger task is at hand in Iraq, the U.S. cannot let Afghanistan fall into chaos."

The newspaper says: "In many ways, the rebuilding of Afghanistan is a far greater challenge than Iraq. The latter has a sizable middle class and had well-established, if corrupt, government institutions. The institutions of state must be created from scratch in Afghanistan. That will take a sustained, invigorated effort by America and its allies. The euphoria of allied victory in Afghanistan has long since faded. Now American resolve is being tested in a different way."

(RFE/RL's Dora Slaba contributed to this report.)