stratfor.com.
The above URL gives a complete report about the Fourth Quarter. Below is an excerpt taken from the last portion of the report.
* The EMU meets politics
Europe, relatively unscathed by the Asian meltdown, has been
affected far more by Russia's problems. Germany in particular
has been financially exposed to the consequences of Russia's
economic crisis. Indeed, it has been most exposed to the
collapse of the Soviet Union, being directly responsible for
absorbing a part of that empire directly into Germany, and for
underwriting development in much of the rest of Eastern Europe.
Today, the architect of German unification paid the price for
only performing with near-perfection and for being on the
political stage too long. Helmut Kohl's defeat also changes the
political equation in Europe in two ways. First, the Social
Democrats are, viscerally, anti-American. Ever since Vietnam and
the nuclear freeze debate of the 1980s, the Social Democrats have
been profoundly uneasy with the idea of U.S. leadership. At the
same time, the SDP is profoundly anti-militarist and would be the
last ones likely to want to see independent German military
action.
What used to be an interesting intellectual contradiction has now
become a fundamental policy issue within the German government.
On the one side, the new German government will not want the
Bundeswehr to be a unit in the U.S. Army. On the other hand, it
is committed to quelling the brutality in the Balkans. On the
third hand, if you will, it does not want to act unilaterally.
With the Kosovo issue looming, the first crisis facing this
government will be to sort out these visceral sensibilities into
something resembling a coherent policy.
The second crisis will be posed by the EMU. The Europeans,
having barely managed to work out the management structure of
Europe's monetary authority, are straining over the question of
who will speak for the EMU at the G-7 meetings. Italy, Germany,
and France argue that, since they are already represented there,
they will be happy to take on the burden. The smaller European
countries want separate representation, sensitive to their needs.
This is not just another tiresome European wrangle. It cuts to
the heart of the new currency. Who exactly controls it and whose
interests will be protected? This debate will now seriously heat
up because the SPD is likely to pursue a very different economic
and monetary policy than did Kohl. The SPD's number one concern
is unemployment in the East, their political base. They will
want to have a much looser monetary policy. They need one.
Thus, the carefully hewn unity among the great powers, which left
out the smaller countries, is now to be torn apart in a new
debate between the new German government and the rest of Europe's
major economic powers.
We continue to believe that the EMU will be dead on arrival. The
EMU is an economic colossus built on a base of political sand.
Each European election now has the potential of undermining the
entire edifice. Even if this German election doesn't, some
election will. The EMU, like Russia and Asia, is going to meet
the dark face of politics sooner rather than later. This last
quarter of 1998 may destroy the EMU, postpone it, or most likely,
allow it to go forward with political constraints that will
guarantee its failure.
|
