The decision over whether the US should invade Iraq or give UN weapons inspectors more time has some business leaders favoring conflict.
Expectations that the US will attack Iraq and concerns about when it will happen and how long war will last are preventing companies from investing and consumers from spending, some chief executives say. While Iraq isn't the only reason for the sluggish global economy, they say improvement can't happen until Iraq is disarmed.
PHOTO: REUTERS
While some chief executive officers are personally opposed to military action against Iraq, they say that at this point war may be the best option for the economy.
"War isn't politically desirable and it isn't a good way to resolve things, but the economy needs to emerge from this long period of uncertainty," said Philippe Houze, co-chairman of Galeries Lafayette SA, France's largest department-store chain.
"Investment decisions are frozen, consumers are wary. We need to get this over with, even if that means war," House said.
Vittorio Merloni, chairman of Merloni Elettrodomestici SpA, Europe's third-largest appliance maker, said: "At this point most companies have discounted that there will be a war," says Vittorio Merloni, chairman of Merloni Elettrodomestici SpA, Europe's third-largest appliance maker.
"What's hurting consumer and business confidence is the uncertainty about when it will happen and how long it will last."
Dieter Zetsche, chief executive of DaimlerChrysler AG's Chrysler unit, agrees.
"Putting the crisis behind us certainly would mean strong momentum for the economy," the Michigan-based executive said in an interview. "As long as all of this uncertainty is in front of us it is certainly somewhat slowing down consumer confidence and the overall potential of the economy."
The world's seven largest economies grew 0.6 percent in 2001 and 1.3 percent last year, the worst two-year showing since the early 1980s, the OECD said. German business confidence is near a one-year low and the combined economies of the 12 European countries sharing the euro will contract 0.1 percent in the first quarter, according to the European Commission.
The US economy has lost 1.6 million jobs in the past two years and consumer confidence is at a nine-year low.
Oil prices have risen 35 percent in the past three months, the highest since Nov. 27, 2000, partly on concern that war with Iraq could disrupt Middle East oil production. Iraq pumps 3 percent of the world's oil supply and has the second-largest oil reserves behind Saudi Arabia.
"We saw a 5 percent decline in passenger car traffic in the fourth quarter and I think a large part of that is that many people just don't want to make travel or other plans right now," said Richard Shirrefs, chief executive officer of Eurotunnel Plc, which operates the tunnel under the English Channel.
The alternative to war is containing Iraq by using sanctions and UN weapons inspectors to rein in Saddam Hussein's weapons programs. Some business leaders say it's the least costly solution.
"There is nothing that Saddam can do as long as the inspectors are running around and he's under close observance," financier George Soros said in an interview. "That really immobilizes Saddam as a threat to the world."
Military analysts say war may now be inevitable anyway after US Secretary of State Colin Powell warned on Feb. 5 that the UN will become irrelevant if it doesn't sanction action against Iraq.
Containment hasn't been much of an option since Nov. 8 when the UN Security Council passed resolution 1441, said Jacques Beltran, a military analyst at the French Institute of International Relations. The measure warns Iraq of "serious consequences" if it lies to or impedes the work of inspectors.
UN chief weapons inspector Hans Blix will present a report tomorrow to the Security Council that some diplomats say may prove decisive in making the case for war.
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