Now that the war in Iraq has completed a crucial phase, a major source of uncertainty for the world economy appears to have been eliminated. However, the global economic outlook still remains cloudy, as illustrated by the fall in share prices that occurred when Baghdad fell into the hands of the U.S.-led forces. This cloudiness is being caused by such factors as the daunting task of rebuilding Iraq, the lingering risk of terrorism, and the outbreak of severe acute respiratory syndrome (SARS), all of which are exerting heavy downward pressure on the major economies.
The fiscal and external deficits of the United States are each forecast to break $500 billion. The recent weakness of the U.S. dollar in this time of crisis is symbolic of the gap between its unrivaled military strength as the world's hyperpower and the current condition of its economy.
In Europe, meanwhile, the rift the Iraq issue is causing among the major powers remains unhealed, and the fundamentals of the region's key economies remain shaky. European share prices have fallen roughly 45 percent over the past year -- much faster than the 25 percent the American and Japanese markets have dropped.