WORLD ECONOMIC NEWS
Italy: Integrate Eastern Europe Through Infrastructure Corridors
On the eve of the just-concluded European Union summit in Copenhagen, the Italian government had proposed that EU enlargement be subordinated to "the realization of strategic infrastructure, both material and immaterial." In particular, Italy was and is interested in the accelerated realization of three "trans-European corridors": No. 5 (Trieste-Ljubljana-Budapest-Lvov-Kiev), No. 8 (Bari-Durazzo-Skopje-Sofia-Burgas-Varna) connecting the Black Sea with the Adriatic, and No. 10 (Salzburg-Ljubljana-Zagreb-Belgrade-Nis-Saloniki). These three corridors are part of the 10 trans-European corridors identified at the Crete conference in 1994, whose realization has been hindered by the lack of financial resources, due to the Malthusian policies of the Maastricht Treaty, the founding document of the European Union.
Parallel to the proposal to accelerate the realization of the trans-European corridors, the Italian government proposed that EU member states proceed with the same urgency to upgrade their own national infrastructure systems. In order to do so, it is necessary to introduce "quotas of re-nationalization of regional development policies," said a technical paper prepared by the Economics Ministry as a synthesis of the Italian requests at the Copenhagen summit. After identifying the three corridors which are of special strategic interest for Italy, the paper said: "Corridors 8 and 10, although interesting for our country, presuppose the existence of national networks ready to connect with them, to bring benefits to the Italian transport system. For Italy, therefore, the absolutely determining and central role is played by Corridor 5, because it represents the key axis of national communication networks, both internal and international."
The paper called for an "EU-Italy" pact, to establish that those national infrastructures play a European strategic role, to "open the way for 'national' authorization procedures" and "differentiated fiscal policies."
Italian Economics Minister Giulio Tremonti took the unusual step of publishing a commentary, jointly signed with the chairman of the Association of Italian Industrialists (Confindustria), Antonio D'Amato, to accompany the publication of the "technical paper" in the business daily Il Sole 24 Ore on Dec. 11. In the editorial, Tremonti and D'Amato announced the Italian initiative in the EU, stressing that the strategy of infrastructural corridors requested by Italy, and especially the development of corridors 5 and 8, will allow Italy "to exploit, to the advantage of the whole continent, its position in the middle of the Mediterranean, as a crossroads of traffic with Far East Asia".
German Industrial Output Visibly Down
With the exception of the machine-building sector, which is benefitting from a couple of bigger export contracts with China and other Asian countries, the rest of the German manufacturing sector is experiencing a substantial drop in sales and output. For the month of October, the manufacturing sector as a whole showed a drop of 2.1% from September. The biggest declines are in the consumer-goods sector, at 3.1%; and the energy sector, at 2.8%. Even machine-building, which has been able to compensate for losses on the domestic market with exports, reports a drop by "only" 0.8% (annualized, it would be 9.6%).
The automotive sector reports a drop in sales by 6% in November, over the same month last year, and expects an average drop of 3% for the year. In this area too, exports to Asia helped to compensate for a more drastic drop in domestic sales.
Argentine Default Could Bankrupt World Bank
Argentina will not pay a total of $980 million due the World Bank on Dec. 15, and will make no debt payments until there is an "absolute certainty" that a "reasonable agreement" will be signed with the International Monetary Fund, the Argentine Chief of Cabinet Alfredo Atanasof announced Dec. 12, responding sharply to remarks made the same day by IMF Managing Director Horst Koehler, who asserted from Santiago, Chile that "to blame the IMF for what happened, and is happening, in Argentina, is totally inadequate." Atanasof stated that "we're not saying the blame for what's wrong should be pinned on the Fund; what we are saying is the bureaucracy of the Fund has promoted the policies that put us in this situation."
In an interview with Clarin newspaper Dec. 12, Finance Minister Roberto Lavagna was unequivocal: "Just as the Monetary Fund has no time-frame for an agreement [with Argentina], there will also be no dates, or time-frame fixed for payment of our debt." Lavagna rejected alarmist warnings that a cutoff of $2 billion in World Bank loans, as a result of this weekend's non-payment, will seriously damage social, health, and public works programs. The $2 billion was to have been disbursed over a five-year period, he said, and the Finance Ministry is already working on alternative means to keep funding these programs.
Argentina owes a total of $16 billion in 2003 to the multilateral banks (the World Bank, IMF, and Inter-American Development Bank), which are, as Lyndon LaRouche has pointed out, more vulnerable to bankruptcy with every measure they take to bankrupt the sovereign nations which are their members.
Alan Cibils and Mark Weisbrot of the Center for Economic and Policy Research in Washington warned on Dec. 7, that the World Bank could be worse off than Argentina, should the country miss one more paymentas it just did. Argentina is the fourth-largest World Bank debtor, after China, Indonesia, and Mexico. Standard & Poor's is already threatening to downgrade Bank bonds, should Argentina not pay on Dec. 18, as this means that debtors no longer consider the World Bank, and other multilateral agencies, to be "preferred creditors"that is, creditors who get paid first after a default. The Bank raises capital through sale of its bonds, and if the latter are downgraded, this raises the cost of indebtedness, and causes losses for holders of Bank bonds.
According to Clarin, one of the world's largest pension funds, TIAA-CREF, worth $290 billion, just unloaded its $5-million package of World Bank bonds, for "economic reasons."
Weisbrot and Cibils conclude that a total default by Argentina "would then have a big impact on the World Bank's long-term economic health." The IMF has similar problems, because of the percentage of Argentine debt it has in its loan portfolio.
Argentina Foreign Minister: 'Dissolve IMF!'
Coinciding with the Duhalde government's announcement that it would not make a $980-million payment to the World Bank due Dec. 15, Argentine Foreign Minister Ruckauf told a television interviewer that the International Monetary Fund is inefficient, and incapable of dealing with crisis situations. "A new, much smaller and more efficient entity should be createdone that is anti-cyclical, that is, where there is a recession, it shouldn't deepen it."
Ruckauf took aim at IMF Director Anne Krueger: "Doesn't Krueger say that countries have to be bankrupted? Then, I have the same right to say that the IMF should be dissolved."
Malaysia Sends Economic Team to Argentina
Malaysia is sending a team of leading economists to Buenos Aires to share its experience in facing the 1997 speculative attack, according to Malaysia's National Economic Action Council (NEAC), the Singapore Straits Times said Dec. 10.
Argentina had told Prime Minister Mahathir Mohamad earlier this year that it wanted to know how Malaysia had solved its financial and banking problems. NEAC said a four-member team would visit Argentina Dec. 11-15, in response to the invitation to Prime Minister Mahathir earlier this year from the Asociacion Empresaria Argentina, representing a group of prestigious entrepreneurs.
In his letter to Dr. Mahathir, Asociacion Empresaria Argentina president Oscar Viconte said that although the Malaysian case was somewhat different from Argentina's, Argentine officials were very interested to know how Malaysia solved its financial and banking problems. Viconte said Argentina was very surprised at how Malaysia recovered from the Asian financial crisis against all odds, saying that the transfer of know-how between Malaysia and Argentina would be deeply appreciated and would contribute to the strengthening of bonds that already existed between Malaysia and Argentina.
During their visit, the Malaysian team is also expected to meet with the Argentine Finance Minister Roberto Lavagna, as well as holding discussions with Argentine economists on Malaysia's experience in managing the financial crisis.
'AIDS Attacks the Capacities That Enable People To Resist Famine'
"AIDS attacks exactly those capacities that enable people to resist famine," said Alex de Waal, director of Justice Africa, whose analysis appeared in the New York Times Nov. 19. A summary, using much of his language, follows.
About 29 million Africans are infected with HIV, and of those, 3 or 4 million are dying each year. Only 30,000 are receiving anti-retroviral treatment.
Traditional agrarian societies in Africa had managed to adapt to some extent to drought. The victims of drought and drought-induced famine in the past were almost exclusively young children and the elderly. Young adults rarely died, and womenchiefly responsible for agricultural worksurvived better than men. Women knew what wild grains, roots, and berries could be eaten during famine. Families scattered their members over a wide area and called on distant relations for help when times got hard.
But now, the AIDS scourge threatens to undermine even that level of adaptation. AIDS attacks exactly those capacities that enable people to resist famine. AIDS kills young adults, especially womenin other words, the agricultural workers on whom all depend. When the rains come, people must work 16 hours a day planting and weeding the crop. If that critical period is missed, the family will go hungry. In a community depleted by AIDS, each adult still able to work must produce more to feed the same number of mouths, including, of course, the sick adults.
Meanwhile, the burden of caring for the sick has increased in rural Africa. In the cities and towns, many employersprivate and publichave withdrawn benefits. Town dwellers who fall sick go home to their villages to pass their final months. Orphaned town children are sent to the villages to be cared for. The extended families cannot cope with the increased burden.
The drop in adult life expectancy is having other serious consequences. Normally, assets like land and cattle are accumulated and handed down by the older generation. Grandparents assist with child care. Older women pass on their productive skills to their daughters. But now, young people are inheriting debts; they have no one to help with child care, and the deaths of the older generations mean they are not learning essential skills. How can one even make plans on the assumption that things will return to normal some day?
In former famines, relief workers, recognizing the physiological resilience of adults, ignored adults' nutritional needs and focussed on children [who will otherwise suffer mental retardation and physical stunting, if they don't actually die]. But an adult living with HIV needs better nutritionmore calories and especially more proteinto stay healthy. Malnutrition accelerates the progression of AIDS.
As their livelihoods, family networks, and coping strategies collapse, millions of young women are turning to "survival sex"forms of prostitutionto feed their children, with devastating consequences for HIV transmission.
Alex de Waal, whose organization, Justice Africa, is based in London, calls for food assistance and scaled-up anti-retroviral treatment, adding that, above all, the world must act to restore a sense of the future to a generation facing an appalling crisis, to help unlock their energies in search of solutions.
De Waal is also a human rights activist and an adviser to the UN Economic Commission for Africa and UNICEF.
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