Thomas on EMU: Will come, but not convinced...
Mohan, let me start my take of the upcoming EMU with the following clip from Infobeat of 01/28/98. Actually this made all the evening news on TV yesterday:
EU slaps $112 mln fine on Volkswagen
The European Union has fined German automaker Volkswagen and its Audi
subsidiary $112 million for illegal sales practices in Italy - its
largest fine ever against a company. EU antitrust chief Karel Van
Miert says Volkswagen "systematically forced Italian dealers to
refuse to sell VW and Audi cars" to customers from outside of Italy.
Under EU rules, consumers have the right to shop for the best buy
anywhere in the 15-nation bloc. Volkswagen says it will appeal the
decision. (USA Today)
The above is clearly one good feature about EU and EMU: The game field is being levelled, competition will intensify from which the customer should benefit. Other benefits I potentially see is that trade is facilitated in that there is only one currency instead of 9 or so: the Euro. Imagine, no more calculations to be done when you go away on holidays, a lot less dealing and overhead requirements at banks trading desks and backoffices. These are positive things from a practical standpoint: things will get easier and more transparent over here.
The issue of cultural and heritage differences from one country to another is indeed an issue. As you quite rightly point out, normally we in Europe do very strongly see our individual currencies as parts of our nation's identities. You take it away, you take one of the most visible everyday symbol away (I guess this would probably be the case with any country in the world). While it is admittedly more a matter of national pride than business considerations, this issue will linger in Europe for a long time. One will probably not openly admit to such "sentimental nationalism", but believe me, it's there.
A consequence of this is, of course, that the question of who shall rule the monetary policies of Europe. Bad enough that countries will have to give up their rights to juggle their own currencies, the person of the "President of the European Central Bank" is a matter of much discussion and friction, as evidenced by the clash between the French and the Germans (together with the rest of paricipating Europe): The French promote a French guy, whereas all the others favour a Dutch chap. The take is that the French candidate is basically promoted by France only to because of nepotism and "old-boy" arrangements. The French met stiff resistance with their plan, and I think the matter is now settled in favour of the Dutch candidate.
In principle the idea to have only one currency, but continue to have independently governed countries and political entities is faulty in my mind: Either you leave it as it is, or you change it alltogether. I think the United Stated of Europe are an utopy that will not be realized for at least as long as I live (I expect that to be some 35+ years, hopefully <g>). I wouldn't be against it, but I doubt that a strong consensus to fully integrate politically will be found: Imagine a German being President of Europe, all the Angst and terrible memories from WW II will be on the table in a matter of seconds.
I definitely think that the Euro will - for better or for worse - come on time, that is 01/01/99. The political will to do it is there, Chancellor Kohl bullies his baby ahead wtith all his 320 lbs. Many respected economists have argued to delay the start of EMU for two years or so in order to allow for the weaker countries to continue their housecleaning. But they fell on deaf ears with the politicians. The Euro will be stuffed down our throats, whether we like it or not. Because even the hard-core participants like Germany and France will not fulfill on all the strict admission criteria by the end of this year, it may very well be that the Euro will be rather weak and shaky at the outset.
After some 6 months or so, we'll get used to it and it will be possible to live with it. Economically, I see benefits in having the Euro mainly for trade and administration purposes, but I really wonder if it's worth all the trouble. Europeans will accept it over time, maybe even respect it for the economic benefits and - hopefully - monetary stability, but never love it. It will be a hate-love affair, the Euro perceived as something politicians dreamed up in commemoration of their time in office, hoping to be printed in some future history book.
I'm personally not against it. I wouldn't mind if the Euro didn't come, but I'm not that sentimental of a guy to start crying when my beloved D-Mark goes off the boards (I'm Swiss but of German origin).
Maybe finally some notes on the southern countries of Europe: I think only Spain is definitely in the first-round of EMU. Italy is in by 99.99%. To the best of my knowledge, Greece will not be in, Turkey is not even in the EU yet., but I frankly don't know about Portugal: I think they will be in, but I need to check in case you want to know.
In fact, Spain is having a very strong and stable economy right now, profiting from good government decisions, good trade relations with the emerging and already-emerged economies of Latinamerica, as well as significant local investments by mainly Germans, Scandinavians and British that like the country for their holidays and secondary residences. My mother lives and works in Spain, so I guess I have relatively good insight.
One last note, affluent Germans seek to transfer quite a lot of wealth out of Germany these days as the consensus impression is that the start of EMU will be shaky and the Deutschmark will therefore suffer relatively more than the presently weaker currencies like Peseta, Lira, Escudo, etc. German outflows do come to Switzerland also: Many German banks are only now in the process of setting up Swiss subsidiaries to provide their German customers with private banking and investment managment. Other than into Switzerland, the Germans hide their wealth in Luxemburg (will be in the EMU) and Liechtenstein (will be in it also). My take is that they do not invest heavily overseas.
Hope to having provided some useful thoughts here. Thread, feel free to discuss this babe further if you like.
Thomas |
