Analysts see US as bigger risk than Argentina, Brazil

Despite near-daily news of economic strife in Brazil and Argen-tina, a growing number of econo-mists and governments around the world worry that the biggest risks to the global economy are emanating not from Latin America or Asia but from the US and Europe.

Bankers and finance ministers will descend on Washington this weekend for the annual meetings of the IMF and the World Bank, anxious about economic imbalances in the US, the possibility of war in Iraq and foot-dragging on free-trade by rich countries.

In its newest assessment of world economic prospects, the IMF joined other forecasters on Wednesday in reducing its expectations for growth in the US and noted that neither Europe nor Japan show any sign of picking up the slack.

The fund also stepped up its criticism of the US for running up huge trade imbalances, calling them "unsustainable" and a possible source of instability if they lead to a sudden a steep drop in the dollar.

The fear is that global financial markets could impose a sharp and unpleasant correction, possibly in the form of a collapse in the dollar.

A steep decline in the dollar would wreak havoc on poorer nations whose exports to the US would become too expensive.

The IMF and the World Bank are also taking aim at trade barriers, rebuking both Europe and the US in particular for their high levels of farm subsidies and import quotas.

Both institutions argue that trade barriers in the world's wealthy countries, including the new American farm bill that authorizes more than US$100 billion in farm subsidies in the next eight years, present major obstacles for poor countries.

Yet with as many as 20,000 anti-globalization protesters hoping to harangue and perhaps even disrupt the meetings, the fund and the World Bank are under themselves under fire from many directions at once.

The protesters, backed by an increasingly influential array of respected economists, complain that the two institutions are controlled by the US and have undermined poor countries by insisting on free-market policies that primarily benefit large corporations.

The institutions themselves struggle to get the ear of the Bush administration, which despite promises to double aid to poor countries remains skeptical about the usefulness of the IMF and the World Bank and is flatly uninterested in some of their criticisms.

The fund is complaining that the huge US balance-of-payments deficit -- the gap between the amount of money that flows into the country and the amount that flows out -- cannot be sustained and could lead to global disruptions.

Between the US trade deficit and the huge foreign investment it has attracted for the last several years, the US needs inflow of about US$4 billion a day to pay for all its spending.

"Instability in the lead country can have an adverse impact on the international financial system," the fund noted in its latest economic forecast.

It called the US' huge payments imbalances a "significant risk" and noted that much of it stemmed from "financial excesses" of the technology boom.

If American stock markets remain in their current slump, or drop even further, the fund warned that global economic prospects would become even shakier.