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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (51111)	1/24/2006 4:12:59 AM
From: glenn_a	Respond to of 110194

Thanks Mish. EOM

To: mishedlo who wrote (51111)	1/24/2006 7:56:14 AM
From: shades	Respond to of 110194

J OECD Cotis: Unwinding Of Imbalances May Hit EU,Japan Hard LONDON (Dow Jones)--The European Union and Japan could suffer most as global financial imbalances unwind because they have little room to respond through either fiscal or monetary policy, the Organization for Economic Cooperation and Development's chief economist said Tuesday. The large U.S. current account deficit is the most obvious symptom of imbalances in the world economy, with rising foreign exchange reserves in Asia its main counterpart. Members of the Group of Seven leading industrial nations have long seen structural reforms in the European Union and Japan as necessary to reduce imbalances by stimulating domestic demand in those countries and providing a more attractive export market for U.S. and Asian producers. But in a speech to a conference on global imbalances organized by the Royal Institute of International Affairs, OECD Chief Economist Jean-Philippe Cotis said those hopes are ill-founded, arguing that the E.U. and Japan have little contribution to make. "The contribution of structural reform to reducing imbalances may be modest," Cotis said, as in the E.U., structural reforms have weakened consumer confidence by making workers more fearful of losing their unemployment and pension benefits. So while the reforms may boost demand over the long term, in the short term they can have the opposite effect. While the E.U. and Japan can do little to ease the imbalances, Cotis said they may suffer most as they unwind. A substantial depreciation of the U.S. dollar is seen by most economists as a necessary part of the process of reducing the imbalances, but that could hit both E.U. and Japanese exports at a time when domestic demand is still weak. With little room to cut interest rates or boost government spending, Cotis said the unwinding of global imbalances "would hurt Japan and the E.U. the most." -By Andrew Peaple, Dow Jones Newswires; +44 207 842 9270; andrew.peaple@dowjones.com (END) Dow Jones Newswires