Terrorism backlash would ruin travel trade, warns Visa chief

Date: 20/02/03

By Peter Chapman

A LONG-TERM terrorist campaign prompted by war in Iraq would lead to a collapse in international travel inside and outside the EU, the European boss of Visa has warned.

Johannes van der Velde said international travel by business and consumers - a large source of revenue for banks issuing his organisation's cards - would collapse but then gradually recover if there is a war.

But the president and chief executive of Visa International EU said it would stay in the doldrums indefinitely if Islamic terrorists such as al-Qaeda follow-up any US-led attack on Iraq. He said most Americans had already stopped travelling for fear of terrorist attacks, but that Europeans and Asians are still taking international business and holiday flights.

"I am convinced that if war in Iraq starts then the whole of international travel will go down badly," he said.

"Experience we have seen after the 1991 Gulf war and 11 September [2001] shows that for the first three months there is a substantial downturn and then it comes back. That has been the case in both events.

"I expect something of that order this time unless you have war and terrorism. That is my worst-case scenario. It would mean very little international travel."

However the drop in consumer confidence and the collapse in travel would still not be a disaster for revenue streams for banks' credit card businesses, van der Velde claimed. Credit card usage, fed by a shift from cash to plastic, is still on the increase, he said, adding that Visa operates as a service for its financial sector members rather than to make a profit.

Nevertheless, growth in card spending in the event of war and terrorism would slip to 14 or 15% instead of 20%.

Van der Velde's comments add to the gloomy mood of EU financial chiefs this week.

Pedro Solbes, the European commissioner for economic and monetary affairs, said growth in the eurozone is likely to be lower than the Commission's current 1.8% forecast.

Wim Duisenberg, president of the European Central Bank told MEPs on Monday 17 February that the uncertainty over the war has already hurt growth and volatile oil prices had pushed up business costs and consumer prices.

He stressed that it was "at this juncture not possible to assess how the ongoing geopolitical developments will affect the world economy, and in particular the euro area economy".

A long-term terrorist campaign prompted by war in Iraq would lead to a collapse in international travel inside and outside the EU, the European boss of Visa has warned.