-Caveat Lector-

>From Int'l Herald Tribune

Paris, Monday, February 1, 1999

No Dissent, if You Please

Tightly Transcripted Forum Spurns Alternate Views
------------------------------------------------------------------------
By Anne Swardson Washington Post Service
------------------------------------------------------------------------
DAVOS, Switzerland - It was one of those typical discussion groups at the
meeting this year of the World Economic Forum, the annual confab of the
rich and powerful.

Five panelists, average age 63, were up there talking about how Western
Europe is really coming together. A few problems, maybe, but with its new
single currency, the euro, the future is bright, they said.

Then it was question time. The moderator called on Fields Wicker-Miurin, an
American-born management consultant based in Britain who, with a German and
a French colleague, had written and that morning distributed a report
titled ''Wake Up, Europe!''

Europe has big problems, she told the speakers and several hundred
listeners, and proceeded to tick them off: double-digit youth unemployment
in many countries, flawed educational systems, a growing gap between old
and young, social welfare systems that do not improve living standards, a
lack of entrepreneurial spirit and capital - what the report called ''an
ossified, sclerotic economic system.''

The younger generation, said Ms. Wicker-Miurin, 40, is stuck with a set of
rules it does not want and no capacity to change them.

''We have our whole lives ahead of us,'' she said. ''Something needs to be
done.''

The panel members, appearing shocked at this unintentional reference to
their mortality, could hardly have been less responsive.

She was being a bit harsh, said the moderator, Peter Sutherland.

The session ended. A later news release summarizing the session failed to
mention the report or its authors.

But of course, upstarts are not appreciated in Davos. The carefully
organized annual conference of the world's 2,000 biggest economic and
political names is scripted down to the last detail.

The loudest upstarts were kept from the premises. Swiss riot police,
packing plastic shields and visored helmets, mobilized over the weekend
against a planned demonstration protesting globalization.

Davos is where politicians, chief executives and assorted bigwigs come to
rub shoulders and, often, to talk about how well they are managing things.
That was the case with European politicians and the euro: Finance Minister
Dominique Strauss-Kahn of France said the single currency of 11 European
countries means the locus of the world debate has shifted Europe-ward; the
president of the European Commission, Jacques Santer, said the euro will
hasten Europe's political integration.

But a funny thing happened after Ms. Wicker-Miurin's intervention. People
approached her and told her how right she was, that European leaders were
ignoring the very big problems facing them. She received electronic mail
saying the same thing.

''The purpose of the report was to be provocative,'' she said. ''No one
thinks these things are easy to solve, but we need to create the
environment to make it happen.''

With all the hoopla over the euro, and with so much of the world in
economic crisis, it is easy on the Continent to forget that Western Europe
still lacks the creative energy found in abundance in the United States.

German metalworkers still strike for higher wages, much of the Italian
economy operates under the table and wide-scale layoffs in France remain
subject to court approval.

If workers insist on such measures, it is with good reason: Those who lose
their jobs have little chance of finding others.

To at least some Americans here, Europe is something of a museum, a bastion
of social protections and rigid labor rules that keep its companies from
meeting the standards of competitiveness and flexibility decreed by free
trade and open borders.

Even Europeans say their only hope is the euro, which, by making prices
more easily comparable across borders, will require companies to become
more competitive with each other and with U.S. companies.

''Now we will finally get real competition,'' said Gerhard Cromme, chief
executive of the German industrial giant Krupp Group. ''It will bring back
to Europe the speed we need to catch up for the time we lost over the last
20 or 30 years compared with the United States.''

Ms. Wicker-Miurin said it was at Davos two years ago that she, a French
executive, Hubert Joly, and a German, Ulrich Schumacher, then all under 40,
decided they were frustrated by the complacency of the older generation of
European leaders and determined to say something about it.

They spent two years preparing their conclusions and want to pursue the
project further.

In the meantime, at the end of the day Ms. Wicker-Miurin achieved a sort of
recognition: Forum officials asked her to be one of a group of Davos
participants to meet with the anti-globalization demonstrators to hear them
out.




Paris, Monday, February 1, 1999

A Proposal to Monitor World Finance System

In Report to G-7, German Central Banker To Seek Dialogue but No Big
Structures
------------------------------------------------------------------------
By Alan Friedman and Jonathan Gage International Herald Tribune
------------------------------------------------------------------------
DAVOS, Switzerland - Hans Tietmeyer, president of the Bundesbank, said
Sunday he would soon recommend to the wealthy Group of Seven nations the
formation of a committee of financial regulators to exchange information
and track potential problems in the global economy before they erupted.

The influential German central banker was asked by the G-7 last September -
after more than a year of global financial crisis - to study ways to
achieve better coordination among supervisors and international
institutions such as the International Monetary Fund.

In recent weeks there has been a bewildering array of sometimes
contradictory proposals to reshape the way the global economy is policed.
The proposals range from small retouches to ambitious ideas for a whole new
financial foundation.

The Bundesbank chief emphasized in an interview during an international
economic conference here that he did not favor the creation of any large
new regulatory structure. He said instead that he was urging closer
coordination among existing regulatory authorities, adding that he said he
would deliver his report ahead of a meeting of G-7 finance ministers in
Bonn on Feb. 20.

''My proposal will be organizational and will look at how we can bring
together the IMF, the World Bank, plus national bank, insurance and
securities market supervisors,'' Mr. Tietmeyer said.

''The idea is to bring these people together in regular meetings for an
exchange of views and in an effort to come to common conclusions. I am not
talking about crisis management, but about how to insure the smooth
functioning of the system, of markets.''

Although he said it would be premature to provide details of his plan, Mr.
Tietmeyer said he would ''not recommend any big structures, but merely a
small secretariat.''

He added: ''In my view, the most important thing to be done is to deal with
deficiencies and find out where systemic problems are coming up. I am not
interested in an academic exercise but in concretely identifying
deficiencies in the system and new systemic problems and then initiating
the political response to them.''

On Saturday, Robert Rubin, the U.S. Treasury secretary, addressed the
gathering of world business and political leaders here and voiced support
for reforming the ''architecture'' of the international financial system
''to reduce its susceptibility to crises and to improve our response to
crises.''

However, Mr. Rubin appeared to distance the United States from endorsing
some European and Japanese proposals for trying to manage currency markets
or create new regulatory institutions.

''Widely discussed reforms that sound attractive on their surface,'' Mr.
Rubin warned, ''on full examination often raise serious questions to which
there are currently no good answers.'' Mr. Rubin added, ''I have come to
believe that the ultimate key is not economics or finance, but politics -
the art of developing support for strong policy.''

Mr. Rubin was explicit in rejecting calls for the G-7 to try to manage the
level of the dollar, the yen and the euro by creating target zones.
Commenting on the proposals, he said the key to stability in
foreign-exchange markets was good economic policy. For major currencies, he
said, ''target zones and similar measures are no substitute for sound
underlying policies.''

Responding to widespread suggestions that hedge funds had contributed to
the crisis in Asia and Russia, Mr. Rubin said, ''I do not believe that
hedge funds have been a significant factor in the financial crisis.''

But Mr. Rubin conceded that the activities of hedge funds ''may well have
amplified market movements in some cases for some period of time'' and
added that the way hedge funds had leveraged their borrowings in order to
speculate ''merits further examination.''

At the Davos conference Sunday, an informal group of international
political leaders and government officials concluded two days of
consultations on the issue of how to reform the world financial system.

Senator John Kerry of Massachusetts, speaking on behalf of the officials,
said, ''There was no sense that there should be some larger, new
international structure.''

Mr. Tietmeyer, in his interview, also voiced concern about the
record-setting heights of the U.S. equity market. ''I share the concerns
expressed by Alan Greenspan,'' Mr. Tietmeyer said, referring to the
chairman of the U.S. Federal Reserve Board, who on several occasions has
warned that stock prices may be too high. ''Flying high is a nice thing,
but markets should not lose contact with reality. I hope the markets will
behave in an appropriate way.''

Mr. Tietmeyer noted that the implications of Wall Street's share valuations
were more important for the U.S. economy than were the behavior of stock
markets in Europe, ''which don't play a macroeconomic role that is
comparable to the situation in United States.''

Asked for his growth forecast for the 11 nations in the single-currency
zone in Europe, Mr. Tietmeyer said that with exports slowing, growth in
1999 would only be ''between 1.5 percent and 2 percent.'' The Bundesbank
chief issued a plea for serious structural reforms in Europe, such as
making labor markets more flexible, and he rejected the idea that growth
could be triggered by a simple fiscal stimulus or by interest rate cuts on
their own.

''There is no doubt,'' Mr. Tietmeyer said, ''that we have to create grounds
for strong and lasting growth, but this cannot be done by simple demand
management or relaxation of monetary policy.''

''Do we really have too high interest rates?'' he asked. Benchmark lending
rates currently stand at 3 percent in most of Europe.

In other weekend developments at the Davos meetings:

Stanley Fischer, first deputy managing director of the International
Monetary Fund, emerged from a meeting with Prime Minister Yevgeni Primakov
of Russia suggesting that Moscow was still far from winning back its
suspended package of IMF loans. The IMF suspended its $23 billion aid
package after Moscow defaulted on most of its domestic debt last August.

Mr. Fischer said that ''at a general level we had a meeting of minds about
goals,'' but ''at a specific level'' there was less agreement. ''We have a
team in Moscow now doing the numbers,'' he said, ''but our early analysis
suggests that the numbers are quite far off.'' Mr. Primakov, for his part,
termed the talks ''very positive'' but also conceded that it would take
''more than a year'' to overcome his country's economic crisis.

Mr. Fischer lashed out at critics of the IMF, denouncing those who had
suggested that the Fund had ignored the social costs of its rescue programs
in Asia last year. ''I feel outraged and offended to be told things that
are patently untrue,'' he said. ''It is errant nonsense to say that IMF
programs didn't take the social factors into account.''

William Daley, the U.S. commerce secretary, warned delegates that China's
growing trade surplus with the United States, which could total $60 billion
this year, was not ''politically sustainable'' in the long term. ''The lack
of openness in the Chinese markets persists and is a problem for our
companies,'' Mr. Daley said.

He warned that there was ''growing concern'' in the United States over its
burgeoning trade deficit worldwide.

Goran Lindahl, president of ABB Asea Brown Boveri Ltd., a Swedish-Swiss
electrical and engineering group, responded to calls for greater social
responsibility on the part of multinational corporations. ''We believe that
business is not only about wealth creation,'' Mr. Lindahl said Sunday.
''Instead, global business must assume global responsibilities for the
advancement and proliferation of human rights in everything we do.''

Heavily armed Swiss police officers, dressed in riot gear and wielding
tear-gas guns and rifles, erected metal barricades and sealed off the
conference center to keep 200 protesters at bay. The protesters,
complaining about the negative effects of globalization, were kept a
kilometer (0.6 mile) away from the gathering.

Lee Kuan Yew, Singapore's senior minister, warned that even after Asia
recovers from crisis, it should not aspire to the growth rates of
pre-crisis days. ''I do not see growth recovering at 6, 8, or 10 percent,
because those halcyon days are over,'' he said. ''We are going to face a
different world, more competitive, more severe.''

Developing countries issued a plea to the industrial world that they not
become the victims of a globalized economy but acknowledged the advantages
of an open system, Agence France-Presse reported. The developing world has
a ''bitter sentiment of injustice,'' President Hosni Mubarak of Egypt said,
''a sense that there must be something wrong with a system that wipes out
years of hard-won development because of changes in market sentiment.''
~~~~~~~~~~~~
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