FAZIO: WAR PREVENTS GROWTH; THE ECONOMY REQUIRES PEACE
Business in Italy - Special service by AGI on behalf of the Italian Prime Minister's office
(AGI) - Agrigento, Italy, Jan 25 - War prevents the economy from growing. For the economy to develop and recover, it needs peace instead. This message of peace comes from the Bank of Italy governor, Antonio Fazio, who was at the Agrigento Forex convention, giving an outline of the international economic scene which is still full of uncertainty and which could be very badly affected by an armed conflict.
"An armed conflict," Fazio went on to say, "brings with it consequences that are difficult to gauge in that it has an effect on raw materials and energy, upsetting normal financial and commercial business on a global level, the business on which the considerable performance of the global economy has been based over the past ten years, increasing the chance of new terrorist attacks. The benefits of a pacific co-existence," added Fazio, "and of the continuous research into the international common good are advantageous to everyone: people, families and nations".
The governor's analysis of the international economic scenario is full of pessimism. He said, "Interpreting the economic picture has become difficult and complicated over the past few weeks. "The most recent data from industrialised countries is proving to be full of gaps and question marks which have a telling influence over investment activity. Fears of military and political conflict seem to be having an enormous effect". Only a lessening of these tensions, the governor added, "can set off an increase in production on a global level before the end of the first half of this year". And this hypothesis is supported, in Fazio's view, by recent performance on the stock markets.
"At the end of December," he explained, "statements by the American government on the possibility of avoiding an armed conflict gave an immediate boost to share prices in all the principal stock markets". Then, he added, "the way the situation evolved and the positions that were taken once again had a negative impact on shares prices and the cost of crude oil".
All this in a context that, outlined by the governor, is proceeding very uncertainly. "This uncertainty," he said, "is of interest to all the industrialised economies and any economic recovery immediately suffered a slow-down over the past few months".
In the USA, where trends "during 2002 affected performance in Europe and Japan", the indicators "produced contrasting signals on progress over a short period". There were positive signals coming from manufacturing but "industrial output is still slightly down but share investments are continuing to expand". Fazio gave the thumbs-up to the measures that Bush approved for tax cuts worth 670 million dollars over ten years and to the Fed's monetary decisions. Whilst he continued to be very concerned, on the other hand, about Europe where "in the first nine months of 2002 the GDP increased by little more than half a percentage point compared with the same period during 2001". Fazio explained that we felt the weight of "the weak economic performance in Italy and Germany" where consumption was stagnant, investments were down and the GDP over an entire year was 0.7 per cent, down from the 1.4 per cent of 2001.
Speaking of the global situation from the podium of the ninth AIAF, Assiom and ATIC Forex Convention, Fazio said, "In Europe, the start of the considerable structural reforms to public finances and labour market are crucial in order to make the economy more flexible so as to use the new technologies to become more competitive and increase the level of development". One state of affairs, i.e. the lack of structural reforms, is also of concern in Japan where "the trend of aging demographics is hanging over the country (as is the case in the Old Continent)" and where production remains "characterised by rigidity and inefficiency". (AGI)
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