Full article at: <http://washingtonpost.com/wp-dyn/articles/A13515-2001Feb1.html> Duisenberg's Confidence Contrasts With Fed's Alarm By Alister Bull, European Economics Correspondent Reuters Thursday, February 1, 2001; 12:49 PM FRANKFURT, Feb 1—Fortune is finally favouring European Central Bank President Wim Duisenberg. A recovery in the euro and Europe's economic strength against the backdrop of U.S. gloom have allowed him an air of confidence that was in plain view on Thursday at the ECB's first press conference of 2001. The body language was no bluff as ECB calm contrasted starkly with the alarm sounded by the Federal Reserve, when it cut rates by a hefty 50 basis point a day earlier—its second such a move in a month. Duisenberg savoured the sense of for the 12-nation currency bloc being in the driving seat for the world economy in the face of trouble in the United States and Japan. Although moderating the tone of his comments to admit a more 'neutral' bias, he left ECB rates on hold at 4.75 percent and insisted Europe would be largely immune to the U.S. flu. "While downside risks to real GDP growth exist, growth is very likely to continue at a reasonably robust pace," he said, adding that this would mean at nearly three percent. Last year the collapsing value of the euro exposed the veteran Dutch central banker to the scorn of financial markets and the strain sometimes showed as he confronted the media once a month following a bank council meeting. This time, Duisenberg could hardly contain his satisfaction as his long-ignored predictions that European growth rates would catch up and even overtake the U.S. were being proved right. MEMORY OF EURO CRISIS FADES Since the dark days of October, when candid comments by Duisenberg to the London Times newspaper forced the euro to a fresh all-time low, the single currency has bounced, and euro zone growth has held up as bad news gathered in the U.S. On Thursday, the ECB repeated warnings about the need for vigilance against inflationary wage demands and structural reform. But its statement confirmed that European officials still believed that the region would weather a slowing world economy thanks to lower oil prices and the benefits of lower taxes. The press conference, the first time since December 14 that Duisenberg has addressed the media, preserved the impression that the central bank was not losing much sleep over growth. Some analysts fear that its lack of a sense of urgency compared poorly with the active stance of the Fed and could sacrifice European growth through too much caution. But Duisenberg maintained that success in the fight against inflation was the best contribution the region could make to world growth, a clear warning designed to stifle calls from politicians and business for a swift cut in interest rates. The latest economic sentiment surveys backed the ECB's confidence that the eurozone would continue to grow at a respectable clip above long-term growth averages of 2.25-2.5 percent. In the U.S., the picture is turning increasingly ugly. January numbers from the U.S. National Association of Purchasing Managers showed an even steeper than expected decline in sentiment and warned that the world's largest economy was now "awfully close" to zero growth. Duisenberg didn't quite say 'I told you so', but argued that the eurozone's performance owed much to the single currency, which until now has struggled to find favour with the sceptical populations of its member states. "The existence of the euro and the single monetary policy has provided the euro area with an institutional setting which leaves it significantly less exposed to external influences," he said. © 2001 Reuters
