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Signs that gold is separating from the dollar and rising in all currencies
By Ambrose Evans-Pritchard
The Telegraph, London
Monday, April 5, 2004
http://www.telegraph.co.uk/money/main.jhtml?xml=%2Fmoney%2F2004%2F04%
2F05%2Fcnecb05.xml&sSheet=%2Fportal%2F2004%2F04%2F05%2Fixportal.html
BRUSSELS -- The European Central Bank faces a crisis
as German and French governors battle for the soul of
the institution, paralysing monetary policy at a critical
juncture and badly shaking market confidence.
Senior officials have told The Telegraph that emergency
rate cuts "promised" by the ECB's president Jean-Claude
Trichet were blocked last week in an unprecedented
revolt by the bank's governing council. Analysts were
caught off balance last week when ECB defied mounting
pressure from politicians to respond to grim figures from
Germany, France, Italy, and Holland.
The refusal to act prompted a furious protest from business
groups across the eurozone. "It seems like Europe is
interested only in holding up the walls of the house, without
noticing that inside flames have already reached the second
floor," said Italy's Confindustria.
EU sources said Trichet had pledged a rate cut to Europe's
political leaders but faced unexpectedly stubborn resistance
from German and Dutch colleagues. Mr Trichet and his allies
had signalled a rate cut through a "softening-up" campaign in
the media, while key national capitals were reassured that
monetary policy would at last be loosened.
The campaign was accompanied by a leak of internal ECB
documents forecasting a sharp fall in the inflation rate next
year to 1.3 percent, clearing the way for rate cuts.
Trichet's less than subtle campaign infuriated a bloc of
hardliners led by Germany's Bundesbank, who resented the
way the ECB was being "bounced" into rate cuts. Officials
say Germany's Otmar Issing and Holland's Nout Wellink
orchestrated a counter-coup, insisting that the ECB could
not let itself be "pushed around by governments."
Their concerns reflect complaints from Bundesbank staff
that the ECB is being politicised by Trichet, who is
considered too close to the French government. Ernst
Welteke, the Bundesbank president, was instructed by
his council to resist moves towards a "laxist" monetary
policy, even though he personally favours immediate rate
cuts to stave off a double-dip recession in Germany.
A top EU official warned that the political battles within
the ECB have reached the point where they are seriously
compromising policy. "They are playing a very dangerous
game. The eurozone needs much lower rates right now,"
he said.
"It is already the slowest growing economy in the world,
but consumption here must grow faster than the United
States if we are to correct the massive imbalances in the
world economy and avoid a hard landing."
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http://www.minersmanual.com/minernews.html
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