In this issue:

World Trade Organization Agriculture Talks Break Down

Insurance Giant Allianz Denies Report on Asset Sales

Chavez Says Venezuela's Foreign Debt Is 'Too Much' To Pay

China Is Now World's Largest Machine-Tool Consumer

Israeli Cabinet Approves Killer Budget, Austerity Program

Turkey's Economy a Victim of Collateral Damage from Iraq War

U.S. Attempting To Dollarize Iraq


From Volume 2, Issue Number 13 of Electronic Intelligence Weekly, Published Mar. 31, 2003

World Economic News

World Trade Organization Agriculture Talks Break Down

WTO members will not be able to meet the March 31 deadline to set the guidelines and targets for their agricultural negotiations, to slash the agricultural tariffs and payments to farmers, that were announced with fanfare in Doha, Qatar in November 2001, Agence France Presse reported March 28. After four days of talks, it became clear that no agreement on key issues was possible at this stage, a "very serious matter," said the talks' chairman, Stuart Harbinson.

Insurance Giant Allianz Denies Report on Asset Sales

German insurance giant Allianz, which posted a loss of 1.2 billion euros for 2002, denied a report in the German financial daily Boersen-Zeitung March 23, that it was considering the sale of up to 10 billion euros in under-performing insurance assets. A spokesman for the company said that while incoming CEO Michael Diekmann had put the troubled firms under review, their sale was not planned, Reuters said. Allianz has said it plans to raise 5 billion euros to bolster its cash reserves.

Allianz also plans to cut its stake in reinsurance giant Munich Re from 22% to 15%; while Munich Re cuts its stake in Allianz to 15% from 20%, according to The Scotsman.

Chavez Says Venezuela's Foreign Debt Is 'Too Much' To Pay

Venezuela must "restructure" its debt, President Hugo Chavez announced March 26, swearing that Venezuela would keep paying the debt religiously—"We haven't missed the payment of one cent during the four years of our revolution, and we will continue paying," he said—but the government has already started talks with the banks about a "restructuring the domestic debt, as well as foreign debt," because the foreign debt owed this year is "too much money for our beaten down budget and our beaten up situation," he told a group of business executives on March 26. According to a release put out by the Presidential palace, Chavez he said Venezuela is unable to meet about $5 billion of international bond payments due this year.

This amounts to a declaration that Venezuela is bankrupt. Chavez is trying to get the banks to accept a "voluntary restructuring," but Bloomberg has already put out wires from financial sharks saying the Chavez regime's leverage with the banks is far less than it was two years ago.

Venezuela owes $22.4 billion in foreign debt, and $7.4 billion in domestic debt, according to Standard & Poor's.

China Is Now World's Largest Machine-Tool Consumer

China has become the world's largest consumer of machine tools, worth some $5.5 billion last year, due to its growing infrastructure investment, according to Xinhua March 26. The China Machine Tools and Tool-Builders' Association reported that in 2002, China's own production of machine tools, and tool imports, were each approaching some U.S. $3 billion.

By 2005, purchase of machine tools is expected to reach U.S. $7 billion, and annual imports will be over U.S. $3.5 billion.

Some 26 leading international producers of machine tools, including Germany, Japan, the U.S., and Switzerland, have registered to attend the Eighth China International Machine-Tool Exhibition in Beijing, April 16-22. This exhibition is now one of the four leading such international machine-manufacturing fairs in the world; the other three are held in the U.S., Japan, and Europe.

Israeli Cabinet Approves Killer Budget, Austerity Program

The Israeli Cabinet voted 22-2 to approve a killer budget and economic austerity program drafted by Finance Minister Benjamin Netanyahu, reported Ha'aretz March 26. The two ministers from the National Religious Party, Zevulun Orlev and the fascist Effie Eitam, were the only votes against the budget. Apparently, they do not mind a policy that kills Palestinians, but oppose one that kills Israelis.

The only thing in the budget that Prime Minister Ariel Sharon openly opposed was the tax on foreign workers, to be paid by their employers. The fact Sharon himself employs foreign workers on his ranch, left members of the Cabinet a bit uncomfortable at the obvious conflict of interest. The program will be brought before the Knesset on April 14.

The Histadrut trade-union federation has already announced it will carry out job actions, and even threatened to organize a general strike. Already hundreds demonstrated in front of Sharon's office, protesting the proposed cuts to welfare.

Turkey's Economy a Victim of Collateral Damage from Iraq War

On March 24, Turkey's long-term Treasury bond (due in 2030) fell to 81.5 cents on the dollar, its sixth fall in the past seven trading days. Turkey is paying a premium on its 10-year Treasury bonds of 10 percentage points (1,000 basis points) above the interest rate that would be paid on a U.S. Treasury bond of comparable maturity. Inflation-adjusted interest rates inside the country have climbed to 35%.

The nation is poised to exercise the last $3.5 billion of a credit line from the International Monetary Fund. Internally, Turkey has a national debt that has become so large, that up to two-thirds of Turkey's budget expenditures go to the account of paying debt service on this debt. The March 25 New York Times reported rumors that "the government is nearing default on its domestic debt."

The war, which has cost Turkey a portion of its trade with Iraq, has exacerbated Turkey's economic crisis. Were oil prices to spike again, Turkey's economy would be badly damaged. Christian Stracke, head of emerging markets research at CreditSights, an independent research firm, reported that one option being discussed, would be for Turkey to turn on its printing press to pay its debts, "but that would ... be bad for the economy, because they have been trying to put their past of hyperinflation behind them."

"If winning the war in Iraq sends Turkey into a[n economic] spiral, that is a huge price to pay for overthrowing the regime in Baghdad," asserted Philip Gordon of the Brookings Institution.

U.S. Attempting To Dollarize Iraq

According to the Wall Street Journal March 24, U.S. Treasury officials are meeting with Iraqi exiles to impose a postwar currency to replace the Iraqi dinar, preferably with the U.S. dollar, or by creating a new dinar. Another sign of the utopians' "democracy" campaign.

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