13 September 2001, 13:37 Ifo's Sinn says US attacks will not spark world recession, but delay recovery
FRANKFURT (AFX) - Hans Werner Sinn, president of Germany's Ifo
research institute, said the terrorist attacks in the US will not spark
a world recession, even though they will delay the long awaited
recovery in the US.
In an interview with the Sueddeutsche Zeitung, Sinn said the euro
will probably make gains against the dollar, while European stock
markets should now perform better than their US counterparts.
Investors will no longer be able to regard the US as a safe haven
for their holdings, putting share prices there under long term pressure
and further worsening the world investment climate, he said.
"The short term effects will not be dramatic but they will be
tangible," Sinn said. "It would be wrong though to believe the US and
the world will fall into recession."
"America will probably lose its function as a safe location for
capital investment," he added.
Sinn emphasised the world economy is strong enough to withstand the
effects of attacks, but would be hit very hard if the US pursued a war
in the Middle East, pushing up the price of oil and resulting in a
dramatic energy shortage.
However he said this scenario currently looks unlikely at the
moment.
Sinn said he now expects the Federal Reserve to cut interest rates
again. Whether the ECB follows suit, depends on the economic effects of
the attacks on the euro zone, he said.
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