Six days into a US-led onslaught to topple Iraqi leader Saddam Hussein, governments are beginning to tally up costs, while the uncertainty of war is sapping consumer spending and investment.
US President George W. Bush on Tuesday urged Congress to quickly grant his request for US$74.7 billion to fund the Iraq war, saying despite a "steady advance" by US forces, he did not know how long the conflict would last.
PHOTO: REUTERS
"The need is urgent," Bush said, after a senior Pentagon official on Monday warned that funding for troops in Iraq could run out by May if Congress did not act.
Amid rising costs of war, a still-weakened global economy, and few signs the war will end quickly, consumer sentiment in the US and the euro zone has indeed eroded.
In a survey taken just before the grim reality of war in Iraq, confidence in the US slipped to near decade lows. Dutch confidence hit a record low in March, based on polls conducted in the first two weeks of the month and Italian business sentiment also fell more than expected.
Many economists now fear the costs of a long-lasting war would weigh on economic growth worldwide.
Australian central bank board member Warwick McKibbin estimated the war could milk US$240 billion from the global economy this year and cut world growth to below 2 percent this year -- a pace that would place growth in recession territory.
"I don't think we'll see a strongly growing world economy for another couple of years," said McKibbin, who is also professor of economics at The Australian National University.
In a worst-case scenario, the conflict could cost US$3.5 trillion over 10 years, and even a short war could cost US$1 trillion over a decade, factoring in peacekeeping and the damage to consumption, he said on Tuesday.
Even with uncertainties over the length of the war and rising costs, US stock markets ended higher Tuesday after logging the biggest one-day loss this year on Monday.
The dollar also pared earlier losses on reports of an uprising against Iraqi troops in the oil hub city of Basra, fanning hopes the US-led war could end soon.
At one point in Tuesday's session, the Dow Jones industrial average was up by about 100 points but those gains were pared back, with the index closing up 65 points, or 0.8 percent.
The technology-laced NASDAQ Composite Index ended up 21 points, or 1.55 percent.
"The news in Basra there'd been a revolt against the Iraq forces there really cheered people a lot," said Brian Pears, head of equity trading at Victory Capital Management in Cleveland, Ohio.
European shares also rose, erasing steep morning losses on war worries. They had lost as much as 5.5 percent on Monday.
The FTSE Eurotop 300 index was up 1.37 percent after falling more than 2.8 percent earlier. The euro zone Euro Stoxx 50 index jumped 2.83 percent.
Reports of an uprising in Basra caused oil prices to fall on Tuesday. US oil traded at the New York Mercantile exchange, settled down US$0.69, or 2.4 percent, to US$27.97 a barrel, after reaching a session high of US$29.70.
In London, Brent oil futures fell US$1.28, or 4.9 percent, to US$24.81 a barrel after surging to US$26.92 in earlier trading.
With the length of the war still uncertain, Bush is asking Congress to approve his emergency funding request by April 11.
Bush urged Congress to avoid tacking on unrelated spending to the bill, common with such emergency legislation. "One thing is for certain, business as usual on Capitol Hill can't go on during this time of war," he said.
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