In this issue:

ECB Head Duisenberg: Dollar Crash 'Unavoidable'

Putin Moots Pricing Russian Oil in Euro, Not Dollars

New Regulatory Body To Make Energy Security Top Priority

Baden-Württemberg Refuses To Phase Out Nuclear Power

Nuclear Power: Back on the World's Energy Agenda

Nobel Economics Prize Goes to Duo For Statistical Model


From Volume 2, Issue Number 41 of Electronic Intelligence Weekly, Published Oct. 14, 2003

World Economic News

ECB Head Duisenberg: Dollar Crash 'Unavoidable'

A sharp fall of the dollar is "unavoidable," but a dollar crash has to be prevented by all means, warned outgoing European Central Bank (ECB) President Wim Duisenberg in an interview with the Spanish financial daily Expansion, the Spanish sister paper of London's Financial Times. The German Financial Times featured his statements under the front-page banner headline "Duisenberg Fears Dollar Crash" Oct. 6. Duisenberg's term as ECB president expires at the end of October.

In an unusual statement for a central bank chairman, Duisenberg noted: "The dollar is the currency of a country with a huge deficit in its balance of payments, close to 5% of its GDP.... You can afford this for one year, two years, maybe five years, but at some time there has to be an adjustment of its currency." He added, "We hope and pray that this adjustment, which is unavoidable, will be slow and gradual. We will do everything in our power to make it slow and gradual. Until now, the adjustment is only against the euro." Should this downward "adjustment" of the dollar against the euro continue or even accelerate, it could have severe consequences for the euro-zone economies, Duisenberg said. He didn't specify what kind of measures, such as further rate cuts or outright currency interventions, the ECB could implement to prevent the euro from rising too rapidly.

Putin Moots Pricing Russian Oil in Euro, Not Dollars

At a joint news conference on Oct. 9 with German Chancellor Gerhard Schroeder in the Urals city of Yekaterinburg, Russian President Vladimir Putin commented on rumors that Russia will soon start to trade its oil exports in euros, rather than dollars. "We do not rule out that it is possible, he said. "That would be interesting for our European partners." He then noted that the decision wouldn't depend solely on the government, because the main Russian oil companies are not privately-run. A German government source stated on the same day in Yekaterinburg: "The question is taking on increasing significance."

According to the Moscow Times Oct. 10, already in 1999, just after Putin became Prime Minister, he laid out a proposal to move Russia's trade out of dollars and into euros. "A switch into euros by Russia, the second-biggest oil exporter behind Saudi Arabia, and holder of the world's largest natural-gas reserves, would represent a major shift in the balance of currencies behind the world's most traded commodity," the Times observed.

Presently, Russian oil exports create a daily demand for dollars in the volume of about $170 million every day. Michael Lewis, head of Deutsche Bank's commodity research, said: "If Russia makes this move, it will be a reorientation of its economy towards Europe."

New Regulatory Body To Make Energy Security Top Priority

Security of energy supplies must become the top priority of the new regulatory body for the German power and gas markets, stated Georg W. Adamowitsch, German Deputy Economics Minister, at an energy conference in Düsseldorf on Oct. 6. Currently, there is no oversight agency for the German power market, which was deregulated five years ago. But the German government, he said, is now preparing legislation to establish an energy-regulating body by mid-2004, which will be added to the already existing Regulatory Commission for Telecommunication and Postal Services (RegTP). The legislation will be presented by the end of this year.

The job of the energy regulators will not be just to ensure fair competition. In view of the recent blackouts in the U.S. and Europe, energy supply security has to be the top priority, stated Adamowitsch. Recent events have shown the extraordinary vulnerability of technologically advanced economies. Everybody has to recognize the risk of huge economic damage, in particular if investments into power plants and grids are too low. He said that the German government would now put the energy supply security up front, not only on the national level, but at the EU level as well.

On Sept. 29, European Commissioner for Transport and Energy Loyola de Palacio announced preparations for a new European energy market bill. A key feature of the new legislation will be that national regulatory bodies in the future have to force certain investments by energy firms into power infrastructure. Italy, Spain, Portugal, and Britain were described as the weakest flanks of the European Union power grid.

Baden-Württemberg Refuses To Phase Out Nuclear Power

The CDU/FDP coalition government of Baden-Württemberg, in the southwest of Germany, has announced it will start a joint initiative in the German Bundesrat (Upper House) with the states of Hesse and Bavaria to organize "the abandoning of the abandoning" of nuclear power in Germany. Another option is to challenge the agreement on phasing out nuclear power, the so-called "nuclear consensus", to German courts. Baden-Württemberg Economics Minister Walter Doering called for prolonging the life span of nuclear power plants to 50 years, instead of the 30 year maximum set in the agreement. State Environmental Minister Ulrich Mueller described the "nuclear consensus" as nothing but a "capitulation declaration" by the German power suppliers. This strategy, that is phasing out nuclear power step by step between now and 2020, is wrong and therefore needs a "correction."

Among all German states, Baden-Württemberg has the highest share (58%) of nuclear power in total power generation. The state government has ordered a study, which has just been released, documenting the likely consequences for the state of the "nuclear consensus." The study notes that the state, one of the remaining industrial Mittelstand (small to medium-sized manufacturing) centers of the German economy, would become extremely depended on power imports. These imports would not only come from France, where most of the power generation is nuclear, but would also have to come from places like Ukraine, that is from nuclear power plants with much lower security standards.

Nuclear Power: Back on the World's Energy Agenda

"Atomic Power—Comeback of the Reactors," reads the headline of a five-page feature in the latest issue of the German newsweekly Spiegel. The perplexed writers of the liberal magazine note that there is suddenly a worldwide drive towards nuclear power, "as if the partial meltdown in Harrisburg 1979, and the super-catastrophe in Chernobyl 1986, would never had happened." The U.S., Japan, China, India, South Korea, Taiwan, South Africa, and Russia are all planning to build new nuclear-power plants. And even in Europe, where countries like Germany, Sweden, Belgium, Italy, Spain, and the Netherlands have formally decided to completely abandon nuclear power, there are efforts to develop an upgraded European pressurized water reactor (EPR).

International Atomic Energy Agency (IAEA) director Mohammed ElBaradei is pointing to the need for nuclear desalination in order to overcome global drinking-water shortages. Ten countries, including the U.S., Brazil, France, Britain, Switzerland, and South Africa are working on the "Generation IV" nuclear reactor, where a meltdown of the nuclear core can be definitely ruled out.

Even more shocking for the Spiegel authors, is the fact engineers, worldwide, are putting great hope "into exactly a reactor type, which had been abandoned in Germany 15 years ago," that is, the high temperature reactor (HTR). And there are new technological solutions in the pipeline for dealing with nuclear waste, such as the transmutation technology put forward by Carlo Rubbia and others.

Spiegel acknowledges that "atomic researchers are now driven by a new obsession with progress, which the world has not seen for 50 years. Then, it was U.S. President Dwight D. Eisenhower, who, in his famous "Atoms for Peace" speech, called on the community of nations to adapt nuclear forces to serve the 'art of peace.'"

Nobel Economics Prize Goes to Duo For Statistical Model

Robert Engle of the U.S., and Clive Granger of Britain, were awarded the 2003 Nobel Memorial Prize in Economic Sciences, for developing new statistical methods to predict the future by analyzing economics data over a long period of time. Forecasting models based on their Aristotelian work, which smooth out some of the impact of erratic swings in statistics, are widely used by financial analysts. Engle, for example, was honored for coming up with the concept of "auto-regressive conditional heteroskedasticity," or ARCH, for short.

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