U.S. Slowdown and Euro Optimism Hot Topics in Chilly Climes

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Evidently, the rest of the world trusts Alan Greenspan too.

Yes, Topic A this year at the annual economic get-together of 3,200 politicians, business folk, cultural leaders — and thousands of protesters — in swanky, snow-capped Davos, Switzerland was the U.S. economic slowdown and whether it will become a global one.

The consensus from an economists' panel on Day 1 of the summit: They're not too worried. "We are not talking about global recession. We are talking about a slowdown on nonsustainable growth," said Jacob Frenkel, Merrill Lynch economist and former governor of the Bank of Israel. "When a giant sneezes, the neighbors feel it — especially Mexico and Canada — but the rest of the world is going to be seeing a much lesser problem."

Alan Blinder, economics professor at Princeton and former deputy chairman of the Fed (who had more than a few run-ins with Greenspan during his tenure) put the chance of a U.S. recession at no better than one in three. Ken Courtis, Asia vice-chairman at Goldman Sachs, was more worried about Japan.

But perhaps unsurprisingly from a summit whose original purpose was to firm up Europe's economic prospects against America's, the panel also had some words of cheer for the euro, which they predicted would strengthen in the coming year.

The infant (and correspondingly shaky) currency will get an automatic boost from Greenspan's continuing cutting of short-term interest rates as he does battle with a slowdown in U.S. growth that has reached, Greenspan allowed Thursday on the Hill, "very nearly zero." Generally speaking, a currency's value goes up with interest rates — high rates making it more attractive to foreign investors — and when Greenspan cuts rates again Tuesday the European Central Bank, which recently passed on a chance to cut rates, will have picked up as much as a full point on the competition.

But the eurozone is not in danger of becoming the world's economic kingpin just yet. As Davos 2001 kicked off, the E.U. and Ireland were in a shouting match over — get this — Ireland's economy doing too well.

"The Irish government has to face the problem of an excess of success," said the E.U.'s commissioner for economic and monetary affairs, Pedro Solbes. The worry is that Ireland's runaway boom — growth over 10 percent and unemployment under 4 percent, for starters — will cause inflation across the eurozone because the rest of the euro economies are considerably more sluggish.

That's one of the flaws of a central bank's trying to fix interest-rate policy across an economically disparate zone, and the E.U. is sharpening its political teeth, threatening to slap a censure on the country if they don't cool things down with some wet-blanket fiscal policy. Nuts to that, say the Irish — they vow to keep raising spending on welfare and education and cutting taxes, the continent be damned.

"It's amazing that our E.U. partners would want to punish the most successful economy in Europe," said Deputy Prime Minister Mary Harney, who directs Irish efforts to attract foreign investment. "They really ought to be thinking of ways to emulate our approach, not to stifle it."

She'll never get into the really exclusive Davos après-ski parties talking like that.