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Heed the economic storm warnings

The global economy these days bears an eerie resemblance to that scene in The Perfect Storm where the meteorologists are looking at the swirling images at disparate points on the map. Yikes, they tell themselves, if all this bad weather comes together, it's going to be one hell of a blow.

Perhaps we will be lucky, we mariners of the global economy. Perhaps the tempests brewing over Argentina, Japan, Europe and the United States will lose their force and gradually dissipate.

But perhaps not, and that's what is worrying some of the wisest heads on Wall Street. They see the possibility that the different bits of bad news might converge in an economic version of the Perfect Storm. What perturbs them, too, is that the captains of the fleet _ the people responsible for economic policy in the United States, Europe and Japan _ seem to be ignoring the danger signs and actually taking steps that could make the crisis worse, if it comes.

Recall the cocky manner of Billy Tyne, the captain of the Andrea Gail (played by George Clooney in the movie), bravely but foolishly steering his boat straight into the eye of the hurricane _ little imagining that he would soon encounter waves 10 stories high.

Alas, that's the image I have in my mind when I think of President Bush, Japanese Prime Minister Junichiro Koizumi and German Chancellor Gerhard Schroeder sailing off to the Group of Eight summit that opens Friday in Genoa, Italy. These global leaders don't seem to have a clue about what could lie ahead.

Each of the storm centers, viewed separately, looks manageable enough. Let's start with Argentina, the latest example of the financial contagion that swept Asia in 1997 and pounded Russia in 1998. Because of fears that Argentina might eventually have to default on its $130-billion in government debt, the country's stock and bond markets were in near panic last week. The jitters quickly spread to emerging markets around the world. The result was a rush to dump any stocks and bonds that looked risky, from Poland to the Philippines.

In Japan, the good news is that Koizumi's government is serious about fixing the decade-long economic crisis. The bad news is that in the short run, his austerity measures will make things worse. Unemployment is likely to increase to over 6 percent soon.

Europe's strategy for dealing with the gathering economic storm is to ignore it. The latest evidence was Thursday's statement by Schroeder dismissing the need for tax breaks or other stimulus to boost the slumping German economy. "We are holding firm to the austerity course," Schroeder said. What is this man thinking? The slowdown in Europe's largest economy is already sapping the rest of the continent. This is a time to be cutting taxes and interest rates.

Also sleepwalking through the storm is the European Central Bank, which somehow believes that the biggest economic threat is inflation. At a time when Europe badly needs the stimulus of interest-rate cuts, the steady-as-you-go policy of bank president Wim Duisenberg seems almost delusionary.

Finally, there is the storm over the United States. This is the trickiest one to chart: One day the clouds look dark as night, the next they are pierced by rays of sunshine. But this obviously isn't the same booming economy that kept the rest of the world afloat during the economic crises of 1997 and '98.

What's scary, amid all the global storm warnings, is the sense that there's nobody home in the Bush administration. Is it ready to help steer the global economy through the choppy water? Does it support the International Monetary Fund's efforts to help contain the current crisis in emerging markets? It's hard to be sure _ or even to know who's really running international economic policy. Is it the loquacious Treasury secretary, Paul O'Neill, or the conservative White House economic czar, Lawrence Lindsey?

A global Perfect Storm remains unlikely _ a hypothetical threat rather than an imminent one. But I'd feel a lot better if the captains up on deck showed they were aware of the dangers and took steps to prepare for the worst, even as they hope for the best.

David Ignatius, a novelist and former associate editor of the Washington Post, is editor of the International Herald Tribune.

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