Fresh perils

US President George W. Bush’s latest remarks and the straightforward refusal of Iraqi officials to comply with Western demands and allow UN inspectors to see their arsenal appear to leave dwindling room for averting a showdown. Intensifying media speculation over a military strike against Iraq has already sent shock waves across the world’s financial markets – more evidently in Europe, which feels more vulnerable. The growth momentum on the continent has faded, as member states’ central bankers and economy ministers concluded in Frankfurt on Thursday, adding that a Western attack on Iraq would exacerbate the climate of recession in Europe’s economies. For his part, Federal Reserve Chairman Alan Greenspan warned that prolonged hostilities between the allies and Iraq would have an adverse effect on the economy. A war would clearly usher the world into a new period of uncertainty and generate additional difficulties that are bound to have an impact on Greece. Given the country’s production deficit, which is temporarily offset by a large influx of EU funds, Greece may come under even greater pressure than other countries as a result of its structural handicaps and market distortions. Concerns over soaring prices are well founded, given that a crisis and an ensuing increase in oil prices could reinforce the surge of price increases in the domestic market. All this means that the government needs to wake up and take pre-emptive measures in order to minimize the consequences stemming from a military conflict in the highly volatile Middle East region. This time, the impact on the global economic system could be greater than in previous such situations, and it is hard to predict potential spillovers or side effects. Over the last 30 years, Greece has repeatedly suffered fallout from the various Mideast crises, and it cannot afford to relax. However, in addition to any resulting economic problems, the government has to re-examine national issues through the prism of a new crisis in the Persian Gulf. A potential US-led strike on Iraq would reinforce Turkey’s leverage, as it will be asked to open its military bases to the US and its allies. This, and so long as the Cyprus dispute remains unresolved, may prompt Ankara to make demands on its allies. Greece has to remain alert in the economic and the diplomatic sphere. We can’t afford to relax.

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