ECONOMY

Slow but certain recovery seen for global economy

The global economy is in a much better position to weather the current crisis than in previous instances, largely due to the potential of developing and oil-producing countries, but recovery will be slow, experts said in Athens yesterday. «We will be able to get out of our predicament. Not speedily, not without pain, but we will. The global macroeconomic situation is better than at the time of previous crises. The impact of the unavoidable slowdown in the US economy can, to a certain extent, be offset by the strong growth performance of the major developing countries and of the oil producers, as well as by domestic growth in Europe and in Japan,» said Alexandre Lamfalussy, the former chairman of the Committee of the Wise Men on the Regulation of European Securities Markets, at the Economist forum on banking in Southeastern Europe. Eric Chaney, Morgan Stanley’s managing director and chief economist for Europe, noted that the current credit crisis will unavoidably hit European growth but is not likely to cause a recession, nor affect either emerging markets or Japan. «The most likely scenario is of a partial decoupling (of the European from the US economy)… The new giants, such as Brazil, Russia, India and China (BRIC) will continue spending a lot,» he said. Chaney saw a relatively long period of slow US growth, with ups and downs mainly sustained by exports. Two further pieces of good news are that global demand for capital goods will remain strong and that German consumer demand is about to recover, he said. «Short-term prospects are on the downside, but the long-term prospects are brilliant,» Chaney said He said the Greek economy was likely to sustain minimal impact. «It has a higher potential for future growth, thanks to domestic demand and investment. Its banking industry is not exposed to the subprime crisis and the economy as a whole is relatively closed to the gyrations of global trade,» Chaney said. Alogoskoufis Greek Economy and Finance Minister Giorgos Alogoskoufis told the Economist conference that following the privatizations of banks National, Emporiki and Postal Savings and the solution to their social security issues, the Greek banking system is now highly competitive. As a result, interest rate spreads had now declined from 4.79 percent in 2004 to 4.19 percent, he said. Alogoskoufis said the government this year will begin negotiations with Germany’s Hochtief, the concessionaire operator of the Athens airport for an extension of the contract and listing the facility on the bourse. «Negotiations will be difficult and we have to obtain the (European) Commission’s approval, which may not allow the completion of the listing in 2009,» Alogoskoufis said. He said the new phase of the privatizations program would have an especially developmental character, as it mainly concerned the management of infrastructure facilities. Alogoskoufis also said there was great room for cutting waste in the public sector and that the government was about to submit legislation to put the brakes in the huge deficits of hospitals, local government and pension funds, most of which do not submit annual budgets.