The world has realised that it needs the EU to function and the euro not to go to the wall. This is the case just as much of the United States as China, and of the emerging countries, of Africa and of the Mediterranean countries. The political leaders of all these continents seem united in their agreement on the principle and are taking initiatives which take account of the situation. However, all economists - or nearly all of them - have their own theories and believe that they alone hold the solution to the economic and financial problems of the eurozone. They read their sermon to the European authorities, try to prove that they have been wrong up to now, tell them what needs to be done and then, as far as they're concerned, that's it.
Sadly, things are a bit more complex for the people who have to make the decisions. The Eurogroup pointed this out once again in its meeting in Poland last Friday: it was not possible to make any decisions, because the ministers' views did not coincide (see our bulletin no. 10454). The general opinions were broadly similar, but as they were not ready to agree on any operational measures, they will have to revisit the issue.
America inviting itself? The strangest thing about the whole day was that the American Secretary of the Treasury, Tim Geithner, invited himself along, eventually obtaining permission to take the floor… from Poland, which is not a member of the eurozone. Unsurprisingly, due to concerns of diplomacy, he was heard by the European finance ministers in plenary (but he was not invited to attend the Eurogroup session). His speech received a frosty welcome; the Europeans do not like being lectured to, as was the gist of Jean-Claude Juncker's message when he said that “we do not discuss the increase of the support fund with those who are not members of the eurozone”. He went on to confirm that Europe's priority is to cut its budgetary deficits and that it is the Eurogroup which manages these instruments.
A bit of a verbal crossing of swords, signifying nothing? I doubt it. Shortly before Mr Geithner' visit, the American president, Barack Obama, said something along the lines of “the EU is only taking measures to slow down the crisis, not to defeat it”. The text of Mr Geithner's speech has been released in full, including his statement that the divide between the Europeans over the measures required is putting the whole world at “catastrophic risk”, urging them to pour as much money into Greece as necessary and at the same time to boost economic growth (as the United States are doing in their programme announced on Monday). The American secretary of the treasury also spoke on a few technical aspects, with suggestions for the very functioning of the eurozone (a mechanism whereby the current intervention instruments would be seen as a guarantee, making it possible to bring in other funding) and he stressed the concerted action of the five central banks (including the American FED), which made a certain volume of dollars available to the European banks. Disinterested altruism?
Mr Obama's two concerns, strategy and Chinese demands. The truth is that the Americans have two concerns on their mind, which in actual fact boil down to just one: the dollar, and China.
Basically: the economic recovery plan of the president of the US needs the stability of the dollar, which would be compromised if China started gradually to get rid of the staggering quantity of dollars it has accumulated. Get rid of them how? By investing more and more in euros! This is exactly what it has started to do and, more significantly, what it has said that plans to do a lot more of, with a series of announcements, contacts, visits to Europe and projects. The Chinese authorities stress that the EU is their number one trade partner; they will not drop it and have consistently proclaimed that their country has confidence in the European economy. This does not mean that China will buy any old thing; it is looking for acquisitions and mergers in the high-technology sectors, and it is also looking for something in return: Beijing has asked for the EU finally to recognise its market economy status (which would “reflect our friendship”, as Prime Minister Wen Jiabao put it) and, according to some sources, may even re-open the dossier of the European military embargo. Wang Teng of the Chinese Centre for Trade has said outright that investments in Europe represent “an opportunity to diversify investments of Chinese currency reserves, which rose last June to the equivalent of €2300 billion” and that “European debt instruments are an alternative to American Treasury bonds”.
The previous paragraph, the result of a patient read through a large number of articles by local correspondents and other texts to which I owe a great debt of gratitude, clarifies both the comments of the American president and his secretary of the treasury's bizarre decision to invite himself along to a Community meeting.
Euro-American technical differences, fundamental solidarity. I should however, stress that the differences of opinion between the Eurogroup and the American authorities also cover a number of details in the functioning of the world of finance. On the European side, the view in favour of the tax on financial transactions (Tobin tax) continues to gain ground: it has the support of Germany and France, and will be defended at forthcoming meetings of the G7, whereas for the United States, it spells economic and financial heresy. Another issue is that in the EU, the idea of a separation between the banks which manage the money entrusted to them by their clients and the banks which operate on the financial markets is receiving increasing amounts of support and the details for achieving this are being looked into, yet it is roundly rejected by the Americans (which is strange, because this separation was once applied in the US).
Above all, we must be quite clear that the above considerations do not indicate that there is any kind of parting of the ways between the EU and the US. It would be absurd to think this, as the ties between the two sides are certainly a lot stronger than a few differences of opinion over certain, largely technical, issues and which could in any case change overnight, depending on the whim of the financial markets. The reality is that the authorities of both sides of the Atlantic are currently facing very specific problems, and that each region is reacting on the basis of its own requirements and traditions. Mr Obama's problems are mainly internal.
The City and Wall Street, same behaviour. In the areas in question, the eurozone is having as many problems with the London financial scene as it is having with that of New York. It was in the City of London that the news broke of the latest variation on the theme of the drama/scandal of the trader who manages to lose billions of euros (or dollars) single-handedly. This time, the “victim” is a Swiss bank, and the UK authorities have intervened and arrested the key suspect; but it is the very possibility of these things happening that is crazy. And you have to wonder: for every failure of epic proportions, how many transactions have brought - and are still bringing - rapid and unmanageable profits to speculators in the City or on Wall Street?
Happily, the European Parliament will next week definitively approve the package of directives on the economic governance of the eurozone, having obtained the positive amendments and reinforcements that Guy Verhofstadt, Sylvie Goulard and various other MEPs fought so hard for. In this case, Community procedures and the powers of the European institutions will be reinforced and the functioning of economic governance will be more transparent (see our bulletin no. 10453).
We must never forget that when it comes to the management and functioning of the financial markets, we have, on the one hand, the eurozone with its rules and, on the other, Wall Street and the City. It's not just the Atlantic Ocean which separates the two sides; there is the English Channel as well.
From Africa to the emerging countries. Tomorrow, I will make an attempt at an analysis, focusing on new aspects of economic and financial (and therefore also political) relations between the EU on the one hand, and Africa and the large emerging countries (which have, in actual fact, already emerged quite a long way) on the other.
(FR/transl.fl)