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To: Berney who wrote (2964)6/1/1998 10:20:00 AM
From: smolejv@gmx.net   of 11051
 
EURO special

Eurospecial - Introduction
This is an english translation of the article "capital market efficiency on the
increase" by dr. Detlef Dettinger, published in Optionschein-magazin 06/98
pp 77-79. Translation DJ

The political impulse, that lead to the monetary union, can without doubt be
traced back to the - rather understandable - wish by French to break the
monetary hold of Deutsche Bundesbank on Europe. The German condition of
acceptance however was to base the EZB (european central bank) on the
principles promulgated by the same Bundesbank, which is what eventually
happened. The institutional conditions for a strict policy of monetary stability
were created. The big chances, which a functioning monetary union can offer,
are clear and are not disputed even by its opponents. Let's just mention three
of a number of points:

a) there's no more exchange rate risks and subsequent costs among the
participant countries
b) intensity of competition is increased because of improved transparency
of the market
c) the volatiliy of US$ and Y exchange rates decreases - at least in middle
term, after the period of transition is over and the markets get an idea of
the fair values of the three major currencies.

On the other side the EMU (european monetary union) is exposed to a
political risk. Even if the improvements in the fiscal policies in the past years
can not be underestimated, there's no way - especially in a democratic
environment - to prescribe macroeconomical self-discipline. This also means
that in case of economic divergencies additional steps in the direction of
political union may become necessary.

...end of part I
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