economy survived 9/11, but not unscathed
As stunned financial analysts watched New York’s twin towers
crumble on September 11, many predicted that the terror attacks
would drive an already fragile world economy into a deep recession.
In the event, massive injections
of liquidity into financial markets and prompt interest rates
cuts by central banks across the globe bringing borrowing costs
to their lowest for decades helped the world’s main economies
avoid a prolonged slump.
The gaint US economy did flirt
with recession, and worries still remain. But those are for
reasons related more to the collapse of energy trader Enron
and other accenting scandals than to the traumatic events of
September 11. Moreover, as if to emphasise its resilience, the
US economy is poised to who the strongest growth of any of the
world’s leading economies this year although, in truth, it is
not being offered much competition at the moment.
The Fed slashed its key lending
rate by an other 175 basis points, taking it down to just 1.75
percent. The BoE cut rates from 5 percent to 4 percent while
the European Central Bank lopped another point of its main rate,
taking it to 3.25 percent. They have all left their rates steadysince.
sees quicker economic growth
World finance leaders, seeking
to project confidence in the face of continued stock market
turmoil and a worsening economic crisis in Latin America, pledged
to strengthen corporate disclosure requirements.
They also predicted the pace of
global growth would quicken in the months ahead.
In a joint statement the finance
minister and central bank presidents of the world’s seven richest
industrial countries said that while risks remain, they believe
that coordinated action will keep the fledgling economic recovery
from faltering. "We are committed to sound economic policies
and structural reforms and to working together to improve corporate
disclosure, enhance corporate accountability and strengthen
the independence of auditing," the finance officials said in
The Group of Seven countries the
US, Japan, Germany, France, Britain, Italy and Canada-issued
the joint declaration after five hours of closed-door discussions
at Blair House, the government guest house across Pennsylvania
Avenue from the White House.
evasion growing in US
The Internal Revenue Service is
losing the war on tax evasion because the methods of cheating
grow increasingly sophisticated while the IRS has barely enough
resources to keep pace, the agency chief said in a report recently.
The conflict between a declining
work force and complex avoidance schemes has created" a huge
gap between the number of taxpayers who the Internal Revenue
Service knows are not filing, not reporting or not paying what
they owe, and our capacity to require them to comply," said
Charles Rossotti in a report to the IRS Oversight Board.
"We are winning the battle but
losing the war," said Rossotti, whose five years term as IRS
commissioner ends November 12.
Since 1997, Rossotti said the number
of income tax returns filed has risen by 12 million, with tax
collection increasing $ 527 billion and refunds growing by $
At the same time, the IRS has struggled
to implement a series of new reform and tax laws, and its number
of full-time personnel dropped by 16 percent from 1992 to 2001.
economy grows by 0.6%
Britain’s economy grew by 0.6 percent
in the second quarter of 2002, less than economists had previously
estimated, the government said in revised figures released recently.
Statistics released earlier had
put the second quarter increase in the gross domestic product
at 0.9 percent compared to the first quarter of the year.
The fall was blamed on a manufacturing
contraction. Manufacturing output declined for the sixth consecutive
quarter, dropping 0.7 percent, said the Office of National Statistics.
Output in the service sector grew
by 0.6 percent, with retail, wholesale and auto sales all climbing,
the office said.
Household expenditure rose 1.2
percent. The British economy grew by 2.2 percent in 2001, and
by 0.6 percent in the second quarter of last year.
predicts weaker economic growth
The European Union Commission revised
down its spring forecast of economic growth in the euro zone
from 1.4 percent to "unlikely to exceed 1 percent."
"There is a high level of uncertainty,"
said Economic and Monetary Affairs Commissioner Pedro Solbes
in the preface to the Commission’s quarterly report on the euro
currency area, which was released recently.
Solbes pointed to falls in "stock
market price, weaker than expected external demand, to the increase
in oil prices and to the economic crises in some Latin American
countries" for the pessimistic picture.
As a result, Solbes said unemployment
is unlikely to fall again this year.
budget deficit widens
The German government has widened
its forecast for the country’s budget deficit this year to 2.9
percent of gross domestic product from a previous estimate of
2.5 percent, the finance ministry said recently.
Finance minister Hans Eichel informed
the European Union’s executive Commission of the figure a ministry
spokesman said on customary condition of anonymity.
The move came two days after Chancellor
Gerhard Schroeder’s center-left government narrowly won re-election,
and just as a European Comission paper said for the first time
that Germany’s annual deficit might exceed the 3 percent ceiling
imposed by the 12 nations using the euro currency.
gearing up for privatization
France is pressing ahead with plans
to sell of some big holdings in French companies, but will have
to make a huge cash injection into France Telecom, Finance and
economy minister Francis Mer said recently.
According to an advance copy of
remarks he was due to make on the French radio station Radio
Classique, Mer said the state would reduce its holding in Air
France, which currently stands at 54.4 percent, "probably within
six months to a year", when stock market conditions improved.
He also said that the state was
studying ways of selling off its remaining 9.5 percent stake
in the Credit Lyonnais bank.
The bank’s other two biggest shareholders,
France’s biggest bank Credit Agricole, and German insurance
giant Allianz, through its French unit AGF, are interested in
increasing their stake in Credit Lyonnais.
However Mer refused to comment
on the possibility of the state selling its stake to either
The current French government came
to power earlier this year vowing to privatize numerous industrial
holdings, especially the state owned energy giants EDF and GDF.