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The Coming Week in Europe: The ECB Will Stand Pat as the Fed Moves

Meanwhile, for the equity markets, banks and financial issues will likely remain of interest.
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There are few things worse than an envious central banker.

And next week U.S.

Federal Reserve


Alan Greenspan

will be the envy of monetary authorities the world over. Unlike the rest of the globe's central bankers, Greenspan and his cohorts are widely expected to earn their paychecks next Tuesday when they will likely raise interest rates by a quarter point to quash inflationary pressures.

While Greenspan will have the joy of pulling the rate-hike trigger, the only thing

European Central Bank


Wim Duisenberg

will likely do in the coming week is check out the tans on his sunburned colleagues during the ECB's first meeting after the summer holiday break.

Although no one expects the ECB to raise rates on Thursday and few observers see a move before the new year, Wim and his central banking friends can perhaps find solace in next week's data, which is expected to show the eurozone's economic recovery continues apace.

Sometime during the week, July

M3 money supply figures

for the 11 countries participating in monetary union will be released. M3 slowed in June to 5% in the year versus 5.3% in May, still way over the ECB's reference value of 4.5%. Although the figure is considered only a guide and not a hard target, if July's M3 comes in strong, Duisenberg and company will be given pause for thought.

Prior to the summer break, Europe's central bankers made clear they would be keeping a close eye on developments and should M3 and private credit growth continue to remain robust, the ECB's creeping tightening bias may become more than just talk. "The ECB is likely to be concerned if this continues," says Nigel Anderson, an economist for

Greenwich NatWest

in London.

Also on tap for sometime next week are German



import prices

for July. Both were affected by surging oil prices in the previous month, but the relative weakness of the euro may begin to show signs of putting upward pressure on import prices.

For the equity markets, banks and financial issues will likely remain of interest, particularly after the announcement that

Dai-chi Kangyo Bank

, the

Industrial Bank of Japan


Fuji Bank

are considering joining forces to make a Japanese giant and the world's largest bank.

That news gave rise to speculation European banks may be hurried along the path of greater consolidation. Although European banks have appeared reticent to engage in cross-border mergers, the situation may be slowly changing. Last week Dutch group



bought the remaining stake it did not already own of German

BHF Bank


, and

ABN Amro


Chairman Jan Kalff made offhand comments suggesting his institution might be interested in eventually taking over Italy's

Banca di Roma


If the Japanese manage to create a banking Godzilla, Europe's bankers may become more inclined to try pan-European mergers. Such manifestations of private-sector envy could end up putting the central bankers to shame.