The euro cometh
Pedraza, Jorge
"soft news" over the past twenty years, journalists finally seem to have crossed the line. "Until now there have been topical subjects too grubby for anyone except comedians or the tabloids...
...The American boom economy and the Asian slump have actually helped pump capital into the stock markets and provide dynamic trade opportunities in both directions...
...Until now there have been topical subjects too grubby for anyone except comedians or the tabloids to touch, and on the other side of the bright media line were subjects of high consequence," wrote essayist Kurt Anderson (New Yorker, February 16...
...National governments will be very constrained in how they respond to any such crises by way of taxes or labor legislation...
...To qualify for membership, annual budget deficits had to be reigned in to 3 percent of GDP, and the aggregate of public debt brought down to 60 percent of GDP...
...At this point, with the Duisenberg fiasco fresh in mind, there is little reason to be highly optimistic...
...A compromise was reached when Duisenberg agreed to retire of his own free will after "about four" years when Chirac's candidate, Jean-Claude Trichet, the president of the Bank of France, would take over and remain in place for the full eight-year appointment...
...There is no political process by which these conflicts can be resolved at the Euroland level...
...Another is handling straight news--what happened yesterday--as just that: sticking to the facts, giving information, avoiding opinion...
...or Austria...
...As recently as 1962 and the end of the Algerian war, French generals were seriously plotting to drop paratroopers on Paris and orchestrate a coup d'6tat...
...European leaders have been talking up European economic integration with considerable persistence since the end of WWII...
...O n May 2 in Brussels, in one of the boldest experiments of modern political economy, the European Union (EU) gave birth to the European Monetary Union (EMU...
...One could be optimistic about such mobility happening, at least with the upper level professional cadres and possibly younger Europeans...
...A real pan-European budget and extensive political coordination will have to be forged among groups of people who historically have been unable to come to consensus on issues trivial or urgent...
...Will French sales managers go to Portugal or Denmark for job opportunities...
...Even unemployment, the b~te noire Commonweal 9 June 5,1998 of the past decade, has ticked ever so slightly down...
...The euro will become the official bookkeeping currency...
...If it is true that Europe is in for seven fat years, then they will have seven years to figure out how to deal with the political pressures that intensify during an economic downturn...
...There could not be a more appropriate moment...
...Picking up where Konrad Adenauer and Charles DeGaulle had left off, Francois Mitterand, sensing an uncannily familiar pull of the economic tide toward Germany, pushed in the 1980s for a monetary union that would "control" the Germans and their hegemonic Bundesbank...
...The political stresses of this belt-tightening have been considerable...
...But the tone and intensity of such activities change considerably when they are directed at another country, especially one which has been a traditional enemy in war...
...More than Chirac's or even France's nationalist ego is at stake...
...or Finland...
...The notion that Europeans are too civilized to go to war with each other is a lethal mistake that was made by many twice already this century...
...The future looks rosy...
...Efficient and profitable, powerful pan-European businesses will emerge and grow through these newly delivered economies of scale, and become competitive with American and Asian companies...
...There are strong economic reasons beyond the traditional wishful thinking to suggest that the euro will succeed...
...Euro boosters claim the EU will succeed in balancing the global center of gravity, pulling it away from the U.S...
...On the eve of 2002, the euro will begin to circulate as notes and coins, and the national currencies will be retired from circulation...
...The euro-chasers have all continually promised that monetary union will be precisely the thing that will bring good times to all...
...On January 1, 1999, the EMU will launch the new pan-European currency, the euro...
...dollar be the sole world currency reserve, fine-tuning monetary policy to its own advantage...
...An Italian manufacturer of kitchen tiles will now be able to do business with suppliers and buyers from anywhere in Euroland without having to fear being knocked into unprofitability by a sudden shift in exchange rates...
...More troublesome will be the political responses as one country perceives its economic hardship to be at the cost of another country's prosperity...
...One way for print and television reporters and editors to buck this trend-and to regain public trust--is suggested by the Grand Forks Herald story...
...French politicians, on the other hand, manifest a symmetrically strong need to keep their hand on the economic pump, always ready to prime it with a little more currency flow when political circumstances demand...
...Jorge Pedraza is professor of French and Comparative Literature at Williams College...
...Journalists are now holding forums nationwide to examine their values and responsibilities...
...Jorge Pedraza THE EURO COMETH Bringing unity or fratricide...
...With 290 million people, 19.4 percent of the world's economic output, and 18.6 percent of world trade (as compared to the 270 million population of the United States, with its 19.6 percent of world GDP, and 16.6 percent of world trade), aggregated Euroland represents tremendous economic and financial power...
...As it now stands, Duisenberg and then Trichet, both equally conservative fiscally, will be setting a single and (one assumes) fairly high interest rate for the euro...
...They will cease to exist except as souvenirs...
...The different incarnations of the pan-European association have never stopped talking about it...
...They will need to remain within the budgetary parameters established by the EMU and avoid further aggravating unemployment...
...The last seven years have been lean ones for the plump governments of the EU that committed themselves to monetary union...
...Commonweal | 0 June 5, 1998...
...Economic growth is picking up, inflation remains low, business investments and even that intractable beast, consumer confidence, are looking up...
...Increasing the money supply is an efficient way to respond to very intense and very real political pressures...
...But what about the politics of unification...
...Chirac's dogged persistence, however, almost derailed the entire proceedings...
...Tensions have run high from Italy to Finland as governments figure out ways to reign in spending while not getting voted out of office...
...Will Spanish engineers move to Ireland...
...It took something like ten minutes for the EU to approve the EMU in Brussels...
...With the launch of the euro the currencies of the Euroland states will be locked into a fixed set of exchange rates...
...Britain, Sweden, and Denmark have opted not to join for now...
...For their part, the German electorate, having had to swallow the huge costs of unification, is disgruntled...
...In 1991, Europe's odd couple managed to corral each other and most of the rest of the Europe into the Maastricht treaty, which set the ground rules for the euro...
...We must hope that they will experiment with what will restore trust and forge community...
...Eleven countries--Germany, France, Italy, Spain, Portugal, Belgium, Luxembourg, the Netherlands, Austria, Finland, and Ireland--are the founding members of what economists are calling Euroland...
...Supporters in France, always attuned to questions of grandeur, like to say that this millennial event is "the greatest thing to happen in Europe since Charlemagne...
...The other ten EMU'ers had all agreed beforehand on Wim Duisenberg, the sober former Dutch central banker...
...Even though in the end the markets shrugged it off, not a few see this as an ominous sign of what lies ill store...
...One hopes that as much progress will be made on this front as possible...
...In France they led to the ouster of Jacques Chirac's parliamentary majority and abandonment of many of his government's plans to begin dismantling France's vast social insurance system...
...The European Central Bank (ECB) will replace the central banks of the member nations and determine monetary policy for all of Euroland...
...Quite unenthusiastic about the loss of their beloved deutschmark, they have made the once invulnerable Helmut Kohl, up for re-election in the fall, start to run scared...
...Greece is slotted to join by 2001...
...However, the bulk of Europeans are unlikely to want to move for jobs or opportunity...
...It then took twelve hours to deal with Chirac's insistence that the European Central Bank president be French...
...that is, by putting more emphasis on civic journalism in a time of diminishing straight news...
...Could it happen again...
...But France has always known how to push Germany's buttons with regard to residual war guilt and guilt about German economic success...
...This option will no longer be available for the French or for any other national government in Euroland...
...The europrophets have been offering monetary union as a way out of the problems that have dogged the Old World's political economy for a decade...
...Up until now there has been very little of this kind of labor flexibility in Europe...
...The Treaty of Rome proclaimed union as an eventual goal...
...With a unified currency the structural inefficiencies that constrained European business will vanish...
...No longer will the U.S...
...which has become an arrogantly titanic "king of the world...
...No doubt Europe's forecasters foresaw the macro-economic cycle that is now showing itself...
...Europe, it seems, is entering into fat years, even before the euro is launched...
...Ireland or Portugal, whose economies are truly surging right now, and who want to temper inflation, have wildly different needs from those of France or Spain, which are very keen on generating job growth...
...Consequently, the two countries do not exactly see eye-to-eye on fiscal policy...
...This is far from a sure thing...
...Ever since the "roaring" t w e n t i e s d u r i n g which tens of thousands of deutschmarks were needed to buy groceries, fear of inflation has been deeply etched into the German psyche...
...But now, "for the first time ever there is no line---it's both consequential and as grubby as it gets...
...This was done in the midst of an economic stall in which unemployment has remained near 12 percent across the continent...
...The nagging phenomenon of xenophobic right-wing politics in most of the Euroland nations gives a vivid picture of just how the wrong set of political chain reactions could get going...
...It is one thing for strikes and protests to be against a national government...
...The unseemly row clearly embarrassed and annoyed most of the EU representatives...
...The reason French politicians like to manipulate the money supply is not simply because they like to play causeand-effect with interest rates...
Vol. 125 • June 1998 • No. 11
