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The Coming Week in Europe: EU Finance Ministers' Meeting Should Set the Tone

It will be a relatively quiet week for economic data, but reports from Italy may yield good news.
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Unlike their overworked Yankee brethren, Europeans normally make good use of the weekends. For Americans, who may not have experienced them, weekends are the two days that follow Friday and provide time for relaxation and unwinding.

That laid-back view of work can make the continent a sleepy place after 5 p.m. Friday. Contrary to convention, however, the coming week's action will begin on Saturday. That's when

European Union

finance ministers will be wrapping up their two-day economics and finance meeting in Finland.

Top on their agenda will be Italy's four-year economic plan, which is sure to get plenty of scrutiny as Rome has often been seen as the weak link in the euro chain. For many, those fears were largely confirmed when the Italians admitted in June that they would likely not meet their euro-related budget deficit target for 1999.

Recently however, signs have emerged that all of the doom and gloom talk may have just been a little bit of Roman passionate exaggeration. The Italian economy, it seems, may have more pep than first thought. The employers' association,


, just raised its forecast for 1999

gross domestic product

from 0.9% to 1.1% and lowered its deficit forecast from 2.5% of GDP to 2.2%. While the government is also beginning to talk up the Italian economy, how much slack the rest of the euro nations can or will cut Rome remains uncertain.

If Rome ever manages to shed its shoddy-finances mantle, Germany, long considered the anti-Italy in all things fiscal, ironically may be there to fill the vacuum. German Chancellor

Gerhard Schroeder

has recently been touting a budget-cutting reform package that the financial markets have generally lauded. Unfortunately for Schroeder and his fastidious finance minister,

Hans Eichel

, the rank and file of their center-left


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party are less than keen on major belt tightening.

Heavy losses in two state elections last week likely mean the SPD leadership are also giving up their weekend to try and save some face in Sunday's regional election in the eastern state of Thuringia. Should the party take another pasting, doubts may be raised about the administration's ability to pass the desperately needed reform package through the upper house of parliament, which is controlled by regional officials.

It could be "another less-than-happy Monday in the cards for Mr. Schroeder. No modern governing party has ever fallen so far so fast," says Alison Cottrell, senior international economist for

PaineWebber International

in London. If the opposition center-right

Christian Democrats

gain an absolute majority in Thuringia, it will make "the arithmetic of pushing the budget bill through parliament even trickier."


European Competition Commissioner Karel Van Miert

probably ruined the weekend for many in the travel sector on Friday, after he said there would be competitive issues if


bid for rival U.K. package tour operator

First Choice

was approved. While the final decision will be taken Sept. 22, Airtours and First Choice shares plummeted 12% and 5% on the news respectively.

In Germany, utilities stocks will likely remain the focus after reports



had offered a 10% premium over market value for the remaining state-owned stake of rival


. The two companies have been in talks for weeks regarding a possible merger and Bavaria state's remaining 25% stake is seen as the last hurdle to a linkup between the two. On Friday, Viag's shares rose over 3% while Veba stock dropped nearly 2%.

The coming week will be a relatively quiet one for economic data, with the most interesting figures being Italian manufacturing orders for June on Wednesday and Italian industrial production for July on Friday. If both reports come in as robust as expected, the Rome politicians who had to explain themselves in Finland may be tempted to take a long weekend to celebrate.