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US Slowdown Will Affect Rest Of World

Tuesday, January 29, 2008

PARIS -(Dow Jones)- The economic slowdown in the U.S. will affect the rest of the world, French Finance Minister Christine Lagarde said Tuesday.

Testifying before the Senate Finance Commission about the banking crisis that has provoked a credit crunch and rocked global financial markets, Lagarde pointed out, however, that the effect on France will be attenuated to some degree because only 8% of its trade is with the U.S.

"I don't doubt that the slowdown that we can't avoid seeing in the U.S.... will affect all world economies to some degree or another as they are closely related," Lagarde said.

She said she's "realistic" that the French economy is in a sound position to weather the storm, noting high levels of job creation, better levels of household and business confidence in Europe than in the U.S., and much lower levels of household debt.

"If the German economy suffered, it would affect us to an infinitely greater degree than the U.S. is affecting us, all other things being equal," she said.

"Economic activity in the months and years to come will be very probably driven more by the South East Asian economies such as China, India, and to a lesser degree by Indonesia and the Middle East economies," that are growing at annual rate of more than 6%, she said.

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