Heinz, interesting analysis re. EU and the Euro:
<<Stage Set for Stronger Euro
2050 GMT, 000516
On May 16 French President Jacques Chirac stated, ?We should do everything possible so that Poland ? joins us [the European Union] as quickly as possible.? He also endorsed Poland?s bid to join the EU in 2003 as ?perfectly realistic,? according to Agence France Presse. British Prime Minister Tony Blair, while not mentioning a date, made similar statements in London on March 31, as did the German leadership last week. With the support of the EU?s major powers now openly declared, the EU?s first enlargement into the former Soviet empire is finally set to occur. It will be just the boost Europe needs to speed further integration and strengthen its sagging currency, the euro.
Completing and ratifying the necessary reforms before 2003 is ambitious but feasible. It now appears the will is there, as well. Last week German Chancellor Gerhard Schroeder stated Germany wanted the EU to have all of the internal reforms necessary for enlargement completed by the end of 2002, according to BBC. French Prime Minster Lionel Jospin on May 9 said France would use its term as EU president, which begins on July 1, to push through those same reforms. Already the EU has whittled away at its problematic agricultural subsidies.
The process of preparing for enlargement should help boost the Union?s flexibility and strength. The reforms under negotiation will reduce the number of issues individual members can veto as well as expand the opt-out procedures. This will allow the Union to implement future economic and political reforms more rapidly, while granting members who are more reluctant the option of not participating in the new policy or institution until they see fit. This has worked marvelously for the United Kingdom, with regard to the European Monetary Union (EMU), and could be adapted to the upcoming treaty on the EU?s common defense policy.
More importantly, these reforms will allow the EU to admit the Czech Republic, Hungary, Poland, Slovakia and Slovenia in a bloc as soon as they are prepared, likely in 2004 to 2005. This bloc enlargement will add another 60 million people ? and an annual income of more than $300 billion ? to the growing Union. While small change compared to the multi-trillion dollar Union, it is hefty when compared to the other states of Eastern Europe.
All five states have expressed an enthusiasm for joining the EMU. This would grant the new members the same low interest rates enjoyed by the rest of the EMU members. Lower interests rates will boost growth and reduce inflation. Both factors will strengthen the EU and help buoy the value of the euro. Furthermore, since the EU reforms under negotiation will speed further economic reforms, the markets should reward the euro with further bolstering. Increased market confidence leads to increased market value.
This boost to the euro will embolden pro-integration forces throughout Europe, and the expansion of the opt-outs should quiet the anti-integration forces. Both factors will accelerate future European integration making it a bit easier for the Union to tackle future projects ? like taking in even more members.>>
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