Thursday, February 21, 2002

What hope for the euro? Feb 4th 2002 " ... the currency’s external value as somehow symbolic of Europe’s economic strength ... [the euro] may yet lose more. ... it is still significantly higher than its all-time low, reached in October 2000. ... it is not difficult to find reasonable expectations for the euro’s decline." "Foremost ... America is now poised for recovery from recession and ... to do so more quickly than many people had anticipated. ... But the euro-area’s performance has given much greater cause for concern. ... Germany—the world’s third-largest economy, and the euro zone’s biggest—is in recession. ... The euro area’s lacklustre economic performance has disappointed many of those who had detected signs of a stronger commitment to reform, especially in Europe’s traditionally rigid labour markets. ... Plans to dismantle state-run monopolies and to open Europe’s markets to greater competition are also taking much longer to push through than previously seemed likely." " ... the euro’s continuing weakness is at least partly an inevitable reflection of the dollar’s strength. The American currency has consistently defied predictions of impending collapse. It remains the currency of choice in times of trouble ... " " ... it takes time for a currency to build up reserve status. ... The European Central Bank (ECB) has ... undermined confidence in the single currency. ... the structure and operation of the ECB. ... it is thought to lack transparency ... The decision-making framework puts too much reliance on low inflation ... too much emphasis on undershooting the inflation target ... " "The European Commission is expected to propose reforms in the bank’s structure ... This may, eventually, increase international confidence in the euro. Improved economic performance might also help. And that much-talked-about reversal in the dollar’s fortunes might then take place. ... But it might be unwise to bet on a sudden and prolonged upturn in the euro’s value just yet." ... [more] 4:10:13 PM    comment  []

Bush turns away from the weaklings of Europe "Europeans and Americans are now living on different planets ... the huge gap that now exists between the world view of Europe’s policymakers and their American counterparts. .... To the Bush team, the War on Terror is a defining moment in history ... The consensus in Washington ... is that Europe is irrelevant to the world today. Because it will not spend what is necessary to matter as a military power, its views on issues that involve the use of such power are of no consequence ... the increase in America’s defence spending is almost half again as large as the total budget of Europe’s biggest defence spender, the UK." " ... there is an unfortunate coincidence of timing: the War on Terror has made clear Europe’s impotence at precisely the time that it has demonstrated America’s overwhelming technological advantages. ... The military weakness of Europe is only one factor ... [some think] Europe is completely inward-looking ... They contrast this with outwardlooking America. While Europe fusses over Macedonia and the problems of French farmers, America is developing new, innovative long-run policies towards countries that really matter in the 21st century — China, Russia, India." " ... those who matter here are convinced of two things: the important business of the world will be done by America, which will not let any coalition dictate its mission; and Europe is largely irrelevant to our efforts to make America safe from further harm. There is more. Several Administration economists are convinced that Europe is doomed to economic weakness — low growth and high unemployment. Its military irrelevance will be matched by its economic irrelevance ..." " ... doesn’t understand why the European elites don’t see in the collapse of Argentina a warning. Fixed exchange rates don’t work when labour can’t move freely among nations in the fixed-rate area ... All America can do ... is wait for the strains on the euro to become intolerable, and then politely refrain from saying 'I told you so.' ... he can understand Europe’s frustration, it once having been a great centre of Western culture and power, now reduced to irrelevance." ... [more] 3:38:19 PM    comment  []