Monday, September 1, 2003
U.S. economic data were upbeat but stocks drifted as summer wound down and investors extended vacations. Although the week's trading results were mixed, indexes climbed steadily higher for the month. Asian equities were up for a fifth month straight in August, while those in Europe wavered slightly. The DAX, up for four months in a row through July, was level in August, while the FTSE was virtually flat in August. The CAC, however, is up for five months. In the Americas, all indexes followed here were up for a fifth month.
With Italy, France and Germany all in recession, attention is turning once again to the beleaguered growth and stability pact, which stipulates that EMU deficits should be no more than 3 percent of gross domestic product. All three nations are in breach. The pact was designed at Germany's instigation to keep Europe's notorious miscreants - notably Italy - in fiscal control. The pact worked fine as long as the economies were growing. Smaller EMU members, which took hard steps to meet budgetary restrictions, are now horrified by talk of easing the pact to suit the larger countries. And with growth prospects weak, it looks as though Italy, France and Germany will continue to pierce the debt ceiling for the next couple of years, at least.
French President Jacques Chirac angered many EU ministers last month by calling for the pact to be relaxed temporarily to boost Europe's sluggish economic performance. In Europe, as elsewhere in the developed world, government deficits have been rising as economic growth has slowed. Germany, like France, is planning to cut taxes to kick-start its economy. Germany is heading for a third successive year of breaking the EMU's budget limit. German Chancellor Gerhard Schröder would like to see more emphasis on the growth part of the pact and made a plea similar to Chirac's. The European Central Bank (ECB) is against going soft on budget deficits and has criticized member governments for doing too little to cut their deficits, in particular by failing to pass structural economic reforms.
Positive summer ends mixed
