The Senate clashed over whether a US recession, soaring oil prices and a weak US dollar would negatively impact Bermuda yesterday.

While Government stated Bermuda's economy was strong enough, Opposition and Independent Senators cautioned Bermuda could feel the brunt of international economic factors.

Attorney General Senator Kim Wilson kicked off the debate by outlining the importance of social programmes the Government had undertaken in this year's budget before discussing Bermuda's economy.

"In the United States, the national economy is probably already in — or about to slide into — a recession. While opinions and expectations vary widely, a large majority of respected forecasters now expect at least two quarters of declining real GDP (gross domestic product).

"In Bermuda's case, the outlook is cautiously optimistic. Given the prevailing uncertainty in the global outlook, the Ministry of Finance anticipates that Bermuda's GDP will likely settle in the range of 2.5 percent to three precent. The effect of a short term US recession won't be adverse to Bermuda."

But Opposition Senate Leader Michael Dunkley said he was not as optimistic Bermuda would be immune to the international economy, particularly as the last few Bermuda Government budgets had been large and this one continued the pattern of spending public money and incurring debt.

He pointed to the weak US dollar that could lead to less tourism; the possibility of a Democrat president who could want to change tax regulations for US companies based here; competition from places such as the Cayman Islands and Dubai; increased levels of violent crime which threatens our reputation; the rising rate of inflation; soaring price of oil; and, the increasing size of Government.

In light of all these factors Sen. Dunkley said it was important to see that there was cause for concern.

Regarding the US economy, he said: " I don't think you can just dismiss what is happening, our two economies are very linked."

And Independent Senator Walton Hughes said he too had worries about the economy but said the Government should also be praised for its social spending.

Speaking of the US economy and the Government's belief that a weak US dollar, rising oil costs and other economic factors will not impact Bermuda, Sen. Hughes said: "As probably the last financial secretary alive to have lived through a recession I can tell you, you cannot make this presumption.

"It is a bit naive to say that."

He added that he did not believe that the stream of surplus revenue from international businesses would continue and Bermuda would have to start watching its spending.

"Having said all that, there is much the Government should be applauded for in the budget," he said. "They appear to be very committed to fixing the education problem and have helped many seniors."

Meanwhile Senator Walton Brown said he believed a weak US dollar would mean more European tourists, who stay longer and would likely spend more money on the Island.

He also pointed out that while the US had a small recession in the early 1990s Bermuda was not impacted because of international businesses and construction projects.

And regarding the possibility of Democratic Presidential hopeful Barack Obama — who pledged to take aim at the "Tyco's of the world" — coming to power in the US, Sen. Brown said: "I think it is fair to say that during an election campaign rhetoric may be just that — not in Bermuda of course — but in the US we all know the rhetoric of politicians may not be the same as what they implement when in power."