IMF Warns War against Iraq Will Hit Markets Hard as US Appeals to UN

IMF Warns War against Iraq Will Hit Markets Hard as US Appeals to UN.  The West's fragile stock markets could be plunged into fresh turmoil by a campaign to topple Iraqi President Saddam Hussein over the coming months, the Guardian (UK) reports the IMF warned on Thursday night.  At a time when economic recovery following September 11 was weaker and taking longer than expected, the IMF said that war against Iraq might hit global growth and unsettle investors by pushing up the cost of oil.

Gerd Häusler, the IMF's director of international capital markets, said that "purely from a financial markets perspective, a serious conflict with Iraq would not be a very healthy development."  At the launch in London of the IMF's quarterly global financial stability report, Häusler said there could be a repeat of what happened in 1990 following the Iraqi invasion of Kuwait, when there was a sharp rise in oil prices.  "The financial markets would react to a spike [in oil prices] at a time when economic recovery is weaker and further off than many of us had anticipated weeks and months ago."

The IMF's comments came as US President George W. Bush's speech to the UN heightened war fears and pushed share prices lower on Wall Street, the story notes.

The Financial Times also reports, noting that the Fund identified a number of risks to orderly markets at the launch of its quarterly financial stability report, including panic selling by investors, a sharp slowdown of investment into the US and the failure of some banks.  There were "signs of contagion" from Brazil to other emerging market bond markets, though fewer than in previous crises, the story says the IMF said.  But it also struck a note of optimism, saying that though financial markets could become more volatile, the global economy appeared to be recovering, though at a slower pace than expected. "The most likely outcome is that financial resilience and stability will be maintained."  Agence France Presse, Le Figaro (France) and Il Sole 24 Ore (Italy) also report.

In a separate report, the FT notes that  British Chancellor of the Exchequer Gordon Brown on Thursday tried to call on the spirit that followed September 11—the international cooperation that prevented a human tragedy turning into an economic disaster—to rally a global response to a still uncertain economic outlook.  "We have a recovery, it is under way, but it is slower than expected and there are downside risks, such as what we have seen with the rising oil price in recent months," he said in an interview.

US Federal Reserve Chairman Alan Greenspan and European Central Bank President Wim Duisenberg both echoed that assessment.  But Brown suggested that the way to tackle those risks was not necessarily more cuts in interest rates. Instead, looking ahead to the autumn meetings of the IMF and the World Bank at the end of the month, he stressed the need for a shared effort to drive forward economic reform.  "We have got to have the strength to take the long-term decisions," he said. "And if the world comes together as one, as we did after September 11, then I think that resolution can be important in sustaining and indeed strengthening the world economy over the next few months."

That, he said, meant reform of corporate standards in the US, bank reform in Japan, and—in a reprise of a familiar theme—more structural reform in Europe, of agriculture, finance and energy. He also hoped that the IMF meetings would make a commitment to better monitoring of internationally agreed standards of corporate governance, accounting and auditing, and a review to see whether those standards were still relevant.

The implication, says the story, was that economic concerns would not be allowed to stand in the way of the British government's support for US action in Iraq. "The international community cannot tolerate or leave untackled proliferation where a regime flouts international guidelines and agreements, and threatens stability in its region, and potentially outside that region, and of course we must be prepared to act," Brown is quoted as saying.

US Appeals to UN, Returns to UNESCO

UN Secretary-General Kofi Annan said on Thursday that only the UN could authorize a legitimate military campaign against Iraq, warning Bush against unilateral action, notes the FT in a separate report. "When states decide to use force to deal with the broader threats to international peace and security, there is no substitute for the unique legitimacy provided by the UN," Annan said to the General Assembly.  His bold speech in defense of multilateralism struck a markedly different tone to the words of Bush, and puts Annan potentially at odds with the UN's most important and powerful member, the story says.

In other news on relations between the US and the international community, the Guardian notes in a separate report that 18 years after withdrawing from UNESCO in protest at its alleged mismanagement, the US is to rejoin UNESCO.  The announcement by Bush, greeted with applause by delegates at the UN General Assembly, surprised critics of the Bush administration, which has been accused of flouting international cooperation on the environment and arms control.

"As a symbol of our commitment to human dignity, the US will return to UNESCO," Bush declared during his speech lambasting Saddam Hussein's regime in Iraq.  "This organization has been reformed and America will participate fully in its mission to advance human rights and tolerance and learning."

The surprise announcement of US intentions to rejoin UNESCO helped drive home Bush's message of readiness for effective international cooperation, the International Herald Tribune says diplomats in Europe said on Thursday.  "Brilliant timing," said a French official, citing the US return to the world body as a simple, effective message that the prevailing go-it-alone mood in Washington lately could be overridden for selected international ventures.

The moment for full public reconciliation with UNESCO had been under discussion inside the Bush White House until late last week, officials said. The US move will significantly boost UNESCO’s budget and status.

The news comes as UNESCO Director-General Koichiro Matsuura writes in the IHT and Le Monde (France) that we  have to take up the unmet challenge of the 20th century, education for all, and that of the 21st century, lifelong education for all and the construction of knowledge societies. These challenges concern all societies.

Education for all will be effectively for all only when it becomes the active concern of all. This is for UNESCO a key task. Education is a fundamental human right, set forth in the Universal Declaration of Human Rights and the International Human Rights Covenants, which have force of international law. To pursue the aim of education for all is therefore an obligation for states. Education for all is an ethic predicated on human dignity. Today the notion of literacy is no longer restricted to reading, writing and numeracy. Education should offer access to skills and know-how that enable the individual to take his or her place in society.

It must also be a school of democracy, for the surest defense of the City is an educated and responsible citizenry. Education should be accessible at all stages of life, so as to give a second chance to the excluded and enable every individual to adapt to a changing world and work environment.  This effort will bear fruit only if education for all is integrated in national development and poverty-reduction programs. The poor and excluded, particularly women and girls, should be the main targets.

There are some heartening signs, says Matsuura; in particular, the recent publication by the World Bank of a list of the first 23 countries to benefit from a fast-track program that covers more than half the children worldwide not attending school, and the encouraging pledges made at the recent G8 summit in Canada concerning the funding of education for all.  Governments, international institutions, social agencies, NGOs, associations, the private sector and citizens should join forces in carrying through this undertaking.

Investing in education means investing in security, says Matsuura. Citing Jacques Delors, he says education is learning to know, learning to do, learning to be and learning to live together. Education for all is the best cement of peace, both between and within nations.