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To: PaulM who wrote (24983)	12/28/1998 9:03:00 PM
From: Hawkmoon	Respond to of 116762

Another fine couple of links you have provided on the Euro and China's take on it. Thank you much. I agree that the Euro is ultimately about the manifestation of a global power as those articles indicate. However, power in one sense can lead to powerlessness, or impotence, in another. Look at the US experience in Vietnam in the middle-east as contemporary examples. But the fact remains that the Euro has been been a defacto alternate reserve currency for over a decade now. Why the US dollar remains supreme has been due to the belief that it remains a superpower, economically, politically, and military. Europe will have a lot of birthing pains to go through until they will be able to present such a impression. As a major example, look at how the European community was unable to come to grips with Bosnia and suffered the embarrasment of having to have the US intervene. Over time I see the world forming into 3 economic blocs, as has been predicted for many decades by political economists. There has been recent discussions in the APEC conferences to create an Asian Monetary fund (which would lead to a shared Asian "SDR-style" currency) as an alternative to the IMF. But I'm going to tell you why I think the US will remain predominant. The US is surrounding by two oceans and maintains the most powerful of Navies. Minus an invasion from Mexico <vbg>, we remain the safest harbor in a stormy global sea when it comes to safeguarding value. Europe has seen some of the bloodiest military events occur in its recent history. It also retains an even greater dependence on imported oil than the US, a quality that is shared to an even greater degree by Asia. In order to achieve "superpower" economic status, Europe would have to be able to assert its political and military influence in order to protect its vital interests. I'll believe it when I see it... :0) Until then, people may flirt with the Euro, but the US will remain the safe harbor of choice given its isolated geography, its comparatively lower tax rates (especially for corporations!!), and relative stability. If we lose either of the latter, then I will rescind my analysis.. :0) But given that any systemic shock that "takes us down" will have similiar or more grievous impacts on Europe and Asia. Remember which country is the only major country still avoiding recession. We're also still the world's largest marketplace for all of those cheap goods from overseas... :0) Thanks again for the articles and the opportunity to voice my opinion. Regards, Ron

To: PaulM who wrote (24983)	12/29/1998 6:30:00 PM
From: goldsnow	Respond to of 116762

After EMU, Can EU Political Union Be Far Behind? 09:19 a.m. Dec 29, 1998 Eastern By Alan Wheatley LONDON (Reuters) - The European Union's long drive to monetary union is reaching a climax. But the quest for the political unity that would give the economic superpower a voice worthy of its euro single currency is only just beginning. The euro will be used by 290 million people in 11 countries with an economic weight roughly equal to that of the United States, providing a springboard for it to grow into a rival for the dollar as a global reserve currency. But until the 15 members of the EU pool even more sovereignty, especially in fiscal and foreign policy, politicians and academics say they cannot hope to fulfil the political potential a strong euro gives them. ''We have to give Europe a real political architecture which allows it to play the worldwide role which the euro will allow it to discover,'' Luxembourg Prime Minister Jean-Claude Juncker said this month. Just as importantly, economists say, history suggests that without greater political cohesion the currency could be at risk. For example, unless Brussels has a bigger budget to dole out aid to regions suffering economic shocks, governments could become disenchanted with the loss of control over their currency and interest rates. ''Without some progress to political union, monetary union on its own is flawed,'' said George Magnus of Warburg Dillion Read in London. ''You can't have monetary union in isolation from fiscal and regulatory policies.'' The founding fathers of EMU have always regarded it as a means to the end of political integration, but Germany in particular has complained that progress on the political front has lagged on the road to the single currency. ''The euro can be a success only with greater political union. It is not enough to simply coordinate monetary policy,'' German Chancellor Gerhard Schroeder has said. ''In the long term it is highly probable that the euro will need a stronger political underpinning,'' Bundesbank President Hans Tietmeyer said this month. Such remarks fan the fears of British Euro-skeptics that membership of the single currency is a conveyor belt to a centralized Europe in which nation states are stripped of their sovereign power. Those fears may be exaggerated but most academics believe that closer political cooperation in the broad setting of fiscal policy will indeed be needed to ensure the euro runs smoothly. ''The pressure is going to be on for some development of fiscal arrangements,'' said Christopher Taylor of Britain's National Institute of Economic and Social Research (NIESR). ''The monetary unions that have succeeded are the ones where there has been integration of fiscal authorities taking place alongside monetary integration,'' he said. German Finance Minister Oskar Lafontaine and his French counterpart, Dominique Strauss-Kahn, have already marked down tax harmonization as the new priority post-EMU. Unfair tax competition, they say, can distort the single market as much as fluctuating currencies. Juncker goes even farther, calling for some minimum rules in the field of labor law to avoid ''social dumping.'' ''It's clear that in a single market and a monetary union you need some basic social rules which constitute a minimum for all European countries,'' he said. But how great is the appetite for ''more Europe?'' Leaders ran the risk of getting ahead of public opinion in the drive for EMU, and France and Germany have already signaled that they want to take their time in admitting new members from central and eastern Europe. The clumsy formula agreed recently for who should speak for the euro-11 group in international forums also spoke volumes about the reluctance of big powers to surrender power. Because Germany, France and Italy refused to give up their seats at the top table of international finance, the Group of Seven, their finance ministers and central bank heads will be joined by European Central Bank President Wim Duisenberg and the rotating chairman of the informal council of the 11 euro states. The result is that instead of having a single number to call in Europe in case of a financial crisis, Washington will still have a fat phone book to plow through. More broadly, Europe's failure to rise to the challenge in the Balkans, and the lack of consensus during recent U.S.-British bombing raids on Iraq, graphically underscore the difficulties of forging a common foreign and security policy. French Prime Minister Lionel Jospin said he was undaunted by the divergences over Iraq. ''On the contrary, I see in this another sign of the necessity to speed up the elaboration of a common foreign and security policy,'' he said. The appointment next year of a supremo to coordinate the EU's foreign policy stance should help to do just that. So should Britain's recent commitment -- putting aside an age-old reluctance to accept French ideas about a common defense identity -- to promote a bigger role for the EU in defense planning and possible military action. The self-confidence that would come from a successful start for the euro might also act as a catalyst in the search for a common political identity. Fred Bergsten, a former senior U.S. Treasury official, expects the euro to narrow and perhaps eventually close Europe's monetary gap with America as central banks and investors shift part of their reserves and portfolios from the dollar. The political impact will be great, says Bergsten, director of the Institute for International Economics in Washington. ''A bipolar currency regime dominated by Europe and the United States, with Japan as a junior partner, will replace the dollar-centered system that has prevailed for most of this century,'' Bergsten has written. With EMU under their belt, the EU's leaders will have time and energy to think how best to use any currency clout to develop political union, the NIESR's Taylor said. Even though he expects Brussels to gain more fiscal powers to smooth out EMU bumps, he sees no danger of Europe's nation states being swallowed up in a United States of Europe. Indeed, with the EU destined eventually to double in size, Taylor wonders when the bloc will come up against the limits of political integration. ''The question is whether, particularly in the sphere of foreign policy and defense policy, the interests and objectives of 20-30 European states are sufficiently converged to avoid friction developing when we get to the stage when decisions on these issues are made by qualified majority voting,'' he said. Copyright 1998 Reuters Limited.

To: PaulM who wrote (24983)	12/30/1998 9:53:00 PM
From: goldsnow	Respond to of 116762

Portraits of ECB council members 07:24 a.m. Dec 30, 1998 Eastern FRANKFURT, Dec 30 (Reuters) - The European Central Bank's policy-making council takes formal charge of monetary policy for the 11 countries of the euro zone on January 1. Following are profiles of the 17 members of the Governing Council which comprises the six-member Directorate and the 11 national central bank governors of the countries that have formed monetary union. DIRECTORATE (Number of years for which each member has been appointed is given in brackets): ECB PRESIDENT WIM DUISENBERG, 63 (eight years), was president of the Dutch central bank for 16 years before being appointed head of the European Monetary Institute, the ECB's forerunner, in July 1997. His experience and success in keeping Dutch interest rates and inflation low by tightly linking the Dutch guilder to the German mark made him the ''natural candidate'' for the post of ECB president, according to Bundesbank President Hans Tietmeyer. Although Duisenberg's appointment in May was overshadowed by political wrangling which led to uncertainty over whether he will step down before his eight-year term is over, his handling of Europe's interest rate convergence in recent months has won him praise. Duisenberg's strict monetary stance marked a shift from the more Keynesian approach he favoured as Dutch finance minister in the 1970s when he allowed public spending to soar. Duisenberg, instantly recognisable by his shock of white hair, has also worked at the International Monetary Fund and as a commercial banker. ECB VICE-PRESIDENT CHRISTIAN NOYER 48 (four years) is best known internationally for his former role as the head of the Paris Club of creditor nations, and a relatively unknown quantity as far as monetary policy is concerned. The discreet 48-year-old vowed after being named to the ECB in May to be ''totally, inflexibly independent'' in a post that has taken him out of the political and financial wilderness. His last official position was as top adviser from mid-1995 for former right-of-centre finance minister Jean Arthuis, who was ousted along with his government by the Socialist-led coalition in mid-1997. A product of France's elite Ecole Nationale d'Administration, Noyer rose steadily through civil service ranks before becoming Paris Club head in 1993, and then Treasury Director when Bank of France governor Jean-Claude Trichet moved on to head the central bank shortly afterwards -- before joining Arthuis. ECB CHIEF ECONOMIST OTMAR ISSING, 62 (eight years), a staunch monetarist, joined the ECB from the Bundesbank where he held the same position. Central bank watchers say he was one of the Bundesbank's most hawkish inflation fighters and his inclusion on the ECB's board is widely seen as a a major reinforcement for the new bank in the political battles that lie ahead. Issing, a professor of economics with no political affiliation, is affable and communicative but demonstrated his determination to resist political pressure in 1997 when he played a major role in blocking an attempt by the German government to revalue the Bundesbank's gold reserves to help plug budget holes. Issing, born in the Bavarian town of Wuerzburg, became an economics professor in 1967 and his publications on monetary policy have become standard texts at many German universities. SIRKKA HAMALAINEN, 59, (Finland, five years) was Bank of Finland Governor from 1992 and is the only woman on the ECB council. Hamalainen has worked for Finland's central bank and finance ministry since the early 1960s. She is the hawkish figurehead of the Bank of Finland's anti-inflationary policies, which have broken the country's history of inflation-devaluation cycles. EUGENIO DOMINGO, 53 (Spain, six years), joined the Bank of Spain as board member in 1994. His background is in private banking and as professor of public finance at various Spanish and foreign universities. Domingo, who has close links to the ruling conservative Popular Party, is considered fairly hawkish. He held top positions at the medium-sized Spanish bank Zaragozano in late 1980s and early 1990s. TOMMASO PADOA SCHIOPPA, 58 (Italy, seven years), has impeccable European credentials as a former member of the Delors committee that drew up the blueprint for a European currency union. He established his international reputation when he was appointed Director General for Economic and Financial Affairs at the European Commission in 1978 but has spent almost his entire career as a central banker. After joining the Bank of Italy's research department 30 years ago he has held posts there including deputy director general, but lost out to Antonio Fazio when the bank governorship came up for grabs last time around. Padoa Schioppa was appointed last year to run Italy's stock market regulator Consob. THE 11 EURO-ZONE NATIONAL CENTRAL BANK GOVERNORS BUNDESBANK PRESIDENT HANS TIETMEYER, 67, has been the guiding force in stamping the German maxims of monetary stability and central bank independence on the ECB. His mantra that Europe must maintain what he calls a ''stability culture'' of budget discipline and low inflation has sometimes been interpreted outside Germany as lecturing. But it has been so relentless that he has come to embody central bank independence and monetary stability. As such, he is widely acknowledged to have passed on some of the Bundesbank's inflation-fighting credibility to the ECB, a contribution seen as crucial to the single currency's success. He has also helped to allay, at least to an extent, German fears of swapping the rock solid mark for the euro. Tietmeyer, a member of the Christian Democrat CDU party now in opposition in Bonn, was an adviser to former Chancellor Helmut Kohl, serving as state secretary in Kohl's finance ministry between 1982 and 1990, before he joined the Bundesbank directorate. He became Bundesbank president in 1993. Tietmeyer's direct involvement in European monetary policy-making ends with his retirement at the end of August next year. Germany's new centre-left government is widely to expected to appoint a Social Democrat as his successor. AUSTRIAN NATIONAL BANK GOVERNOR KLAUS LIEBSCHER, 59, became Austrian National Bank (OeNB) governor on September 1, 1998, after serving just over three years as president of the central bank's general council. Liebscher, who received a law doctorate from the University of Vienna, joined the OeNB from Raiffeisen Zentralbank (RZB), where he was chairman and chief executive officer from 1988 to 1995. OeNB monetary policy has tracked that of the Bundesbank for all of Liebscher's tenure and there is no doubt that he will use his ECB seat to reinforce the orthodoxy of price stability, which he sees as a precondition for growth and employment. Regarded as a staunch defender of central bank independence, the silver-haired smoker most recently spoke out against a government proposal to use spare currency reserves to boost research and investment. Liebscher is also known for his opposition to publication of the minutes of ECB council meetings. BANK OF FRANCE GOVERNOR JEAN-CLAUDE TRICHET, 56, doctrinaire defender of a stable French currency to the point where he was nicknamed ''Ayatollah of the strong franc,'' steered the central bank to independence in 1994, and France wants him to take over from Duisenberg as ECB president sometime early in the next decade. Copyright 1998 Reuters Limited.