Snow threatens EU anti-capitalism

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Snow hits out at EU antipathy to business
By Tobias Buck and George Parker in Brussels
Published: June 14 2005 22:09 | Last updated: June 15 2005 00:04

John Snow, the US Treasury secretary, on Tuesday urged European
leaders to stop using anti-capitalist rhetoric or risk losing US
investment.

Mr Snow, on a visit to Brussels, urged European governments to proceed
with free-market reforms and not adopt words or policies that deter
investors.

The comments came amid rising criticism in France of "Anglo-Saxon"
capitalism and anti-business language from Germany's ruling Social
Democrats.

Hedge fund managers and private equity investors were denounced
recently as "locusts" by Franz Müntefering, the Social Democrat
leader.

In an interview with the Financial Times, Mr Snow said any move away
from free markets and competition would hurt European economies.

"American businesspeople are going to put capital where they feel they
are welcome, where capital is honoured and where they can get good
returns," he said.

"It is not so much the language that is used, it is the policies that
get embraced. And if policies get embraced that make capital feel
unwelcome, capital won't come.

"It seems to me shortsighted on the part of anybody to discourage
investment in their own country." Mr Snow also warned against imposing
tough new regulations on hedge funds. "Be careful with the heavy-touch
approach because these are awfully important financial market players.
They make financial markets more efficient and move capital around and
put it in the hands of those who can use it best."

Mr Snow said government regulation could even increase risks. "They
[hedge funds] police themselves to a high degree, because they know
the government isn't there.

"And one of the worrisome things about the government inserting itself
into a situation like that is the moral hazard increase, is the
perception that market players don't need to do the same due
diligence, the same monitoring, the same oversight. That's a concern
with hedge funds and that's a concern with derivatives."

Mr Snow also called on China to take "immediate and significant"
action to revalue the renminbi to avoid the prospect of the threat of
global readjustment falling primarily on Europe.

Separately, an internal debate has started at the European Central
Bank on how far it should go in hinting at possible interest-rate
cuts. Jean-Claude Trichet, ECB president, and Otmar Issing, its chief
economist, have opened the door to a reduction but some central bank
governors have taken a more hawkish approach.

The euro fell on Tuesday to $1.2023, its lowest level since
mid-September 2004, after earlier rising to $1.2152 in reaction to
weaker-than-expected US inflation and retail sales data.
-- 
"Life sure is weird but what else am I to know?" [Jason Pierce]