LOUVRE REAFFIRMATION NOT ENOUGH - U.K. ANALYSTS U.S. And West German reaffirmation of support for the Louvre Accord cannot cure the fundamental problems bedevilling the world economy which lie behind the current collapse in stock markets, London economists said. "There's going to have to be some acknowledgement that the dollar is going to be allowed to slip," said Richard Jeffrey of Hoare Govett. "If not, there is going to be continued fear that when pressure emerges on the dollar, the Fed will be forced to tighten. This throws up the economic abyss of recession in the U.S. With obvious knock on effects on the rest of the world." But some economists added that Wall Street's crash, which dragged other major markets down with it, may help curb the very problems that sparked the turmoil - namely world inflation fears and the massive and persistent U.S. Trade deficits. "If there is a benefit from a 23 pct fall in Wall Street ...It's some sort of resistance to inflation worldwide," said Geoffrey Dennis of brokers James Capel, echoing comments from other London and Tokyo analysts. Lower personal wealth from lower stock prices and fears of further falls should dampen credit growth, curbing inflationary pressures and import demand in the U.S., They say. Such considerations may be helping bond markets resist the equity crash, according to Mike Osborne of Kleinwort Grieveson. "It would be suicidal for any government in the context of what happened in the last couple of days to jack up their interest rates," he added. Stocks surged after news Chemical Bank cut its prime lending rate half a point to 9.25 pct Tuesday and U.S. Fed chairman Alan Greenspan pledged support for the financial system. The news eroded the most immediate fears that the stock collapse would spill over into the economy, via a banking crisis for example, thus precipitating recession. It also helped the dollar rally sharply, to a high of 1.8200 marks from a European low of 1.7880. But economists said today's whiplash moves do not have long term significance and that markets should try to keep the underlying fundamentals in mind. "The United States has been able to live on borrowed time. If the effect of this (crash) is to produce slower economic growth not recession...It contains good news (and) provides a more realistic assessment of the U.S. Economy," said Capel's Dennis. But he added that markets are still very much in danger. "The liquidity doesn't disappear...All it's doing is disappearing from the equity markets," Dennis noted. David Morrison of Goldman Sachs International said world market turbulence will be exacerbated if the Group of Seven (G-7) leading western nations confirms a base for the dollar, as implied by West German Finance Minister Gerhard Stoltenberg's remarks that intervention to support currencies is still on. Last week's dollar fall was partly triggered by expectations that the Germans were more worried about the money supply impact of such intervention than maintaining currency stability. But rigid adherence to dollar ranges would be bad, said Morrison. "The Louvre Accord is fundamentally misconceived. To stabilise the dollar at too high a level is wrong," he said.