Venice summit: Europeans have modest expectations
Frankfurt, West Germany
Leaders of the major West European industrial powers take their seats in picturesque Venice today carrying lists of similar economic concerns. But divisions among West Germany, Britain, France, and Italy about exactly how to tackle economic sluggishness, trade issues, and world debt make it unlikely that the three-day, seven-nation summit will produce any far-reaching agreement.
``I don't hold out exaggerated hopes of what will emerge,'' says Nigel Lawson, Britain's chancellor of the exchequer.
Franz-Josef Trouvain, chief economist for Deutschebank, agrees. ``Our expectations are modest, but our hopes are higher,'' he says.
On noneconomic issues, however, there's a slightly greater prospect of agreement. The West Germans, for example, want to discuss the spread of AIDS. It is possible the other participants, which include the United States, Canada, and Japan, will agree to research coordination.
The Europeans want to discuss Soviet offers on reducing and eliminating various categories of nuclear missiles in Europe. However, each country has individual concerns about potential missile deals. It seems doubtful that they will all reach a common stand on arms control proposals.
In addition, the summiteers are expected to informally spend time discussing the new appointment of Alan Greenspan as chair of the US Federal Reserve Board. On Tuesday, President Reagan named Mr. Greenspan to replace Paul Volcker, who is stepping down.
``It has an unstated high priority on everyone's mind,'' says J. Paul Horne, the chief international economist for Smith Barney, Harris Upham & Co. in Paris.
West Germany's chief concern is that it will be made into a scapegoat for an economically sluggish Europe. Slow growth in West Germany spills over, particularly to the Netherlands, Belgium, and Austria, all of whom trade extensively with it. ``I assume the summit will focus on Germany,'' says Manfred K"orber, spokesman for the Deutsche Bundesbank, West Germany's central bank.
The Bundesbank last week decided to postpone issuing key economic data that might show the economy even weaker than expected. The figures will be released after the Venice summit.
Mr. Trouvain blames the weak performance on ``dollar shock'' - so far this year the mark has risen sharply compared to the US dollar. Thus, he hopes the summit results in a statement that brings stability to currency markets. ``We need something that says all the partners are prepared to defend the present rate,'' says Trouvain.
To promote confidence in the exchange markets, he continues, the US must cut its budget deficit by at least $30 billion to $40 billion this year.
Mr. Lawson says he believes the West Germans, likewise, need to act by going ahead with some tax cuts that have been announced for 1990. But Trouvain says he believes the Germans will only offer a ``conditional parcel,'' suggesting they will act only if growth does not start picking up in the second quarter.
Agreement may also be reached on stopping the agricultural subsidy wars between the US and Europe. ``A consensus is emerging,'' says Lawson. Even the West Germans, who are very protective of their farm interests, are beginning to talk about substituting income supplements for farm subsidies.
Lord Lever, a British economist, says he does not believe a minor amount of tax changes by West Germany will solve the basic trade problem. Instead he counsels the leaders at the economic gathering to deal with the problem of debt in the developing world so that Latin American markets open up to US exports again.
``I am afraid we will only limp toward recognizing we face a uniquely dangerous position'' in the form of the giant US trade imbalance, says Lord Lever.
With the participants pointing fingers at each other, little may actually be accomplished. ``It could be duller than we feared,'' quips Harold Rose, economic adviser to Barclays Bank International Ltd.
But the politicians have a ready alibi for accomplishing little. Margaret Thatcher, Britain's prime minister, and Amintore Fanfani, her counterpart in Italy, have elections to contend with in the next few days. Yasuhiro Nakasone, Japan's premier, has his term of office expire in October. Other summit participants, such as Helmut Kohl, West Germany's chancellor, are suffering in the opinion polls.
``In some ways, this is a meeting of lame ducks,'' says Mr. Horne.