It was neither an ejaculatory exclamation nor an exorcism. We could only with difficulty reproach the authorities responsible for the Euro and the political forces which support it of an excess of triumphalism. The Euro rose against the Dollar faster than foreseen, and its prospects are favourable; but, luckily, those how had announced and foreseen this situation avoided inspiring themselves from the tone that the adversaries of the European currency had used when they denounced the failure of the undertaking, claiming that the Euro had lost in a few months a quarter of its value and rejoiced of the claimed failure that would have affected the European building process as a whole. This moderation is wise. The world has chosen to live in a system of fluctuating exchange rates; thus it is normal that the relations between the currencies permanently change, in one direction and in the other, in relation to economic developments, respective inflation, market feelings and possible mistakes or other hasty or untimely statements by leaders. Thus there will still be fluctuations in the value of the Euro, and we will not revise from week to week, day to day, the judgement over the success of failure of the EMU according to the direction of the wind. What counts, is simply the proof that the canonical phrase "the Euro has a potential for re-evaluation" being neither a ejaculatory statement not an exorcism, but corresponds with the truth.
During the long period of the weak Euro, this section was silent. Given the multiplication of stances, and the near general belief that less said the better, it is not opportune to add other voices, as insignificant as they may be. Today, we no longer risk prejudicing the undertaking, and a few considerations are required. The first concerns the lie according to which, since its creation, the Euro had lost a quarter of its value. On the contrary, the rigorous control of inflation, allowed the Euro to conserve most of its value in real terms, in buying power. Mixing between the value of the Euro compared to the Dollar and its value for the citizens who use it stems from the ignorance of those good intentioned commentators, dishonesty for the others.
The mixture of things. The second comment concerns the causes of the initial slide of the Euro. Each commentator holds a scrap of truth,, but none, to my knowledge, is concerned with making a summary. Below is a non-exclusive list of the reasons put forward: absence of political unity in Europe; insufficient structural reforms; American economic conjuncture; excess of European investment in the United States. Some commentators do not hesitate also quoting the taboo argument: the abnormal level of the Dollar, which enables Americans not to flinch in the face of an impressive deficit in their balance of payments, made possible by the fact that nearly all the countries accept to keep Dollars as a monetary reserve and thus be creditors to the United States without ever (or nearly) demanding a reimbursement of their credit. Any massive transaction for the sale of Dollars would have as effect the collapse of the American currency, which is not logically wanted by the holders of the American currency, who would see the value of their reserves collapse. Thus the systems remains afloat, but this is an unhealthy situations and untenable in the long-term. Adding to this the effects of the difference in the interest rates: all the payment funds logically tend to place their resources in American shares, in American treasury bonds, etc., the amounts that are given to them, in order to prove the wisdom of their placements and attract new investors. Also all European citizens who place their savings in Funds of this kind, contribute in all innocence without knowing, to the weakening of the Euro against the Dollar.
All these causes of the weakness of the Euro are present in one or other analysis, but each only represents an part of the whole. Instead of demonstrating the multiplicity of the causes and their hierarchy, each commentator defends the thesis that it dear to him, and each interest group calls for remedies that are profitable to it. Thus, to make a single example, UNICE is calling for reforms of pensions, the liberalisation of rail good transport, the Community patent and the lowering of energy taxation as "without these reforms, the Euro risks remaining undervalued for a long-time". In fact, the Euro was weak for many reasons intertwined in each other and which must all be taken into consideration is we want to avoid that they become so again.
Parity in the spring? At present, we speak of a Euro/Dollar parity for the spring. According to some observers, to movement will be faster, while other feel that it would be preferable that the Euro stabilises around 0.90 Dollars. Nobody can steer the development in a precise manner, but policies that will be followed will determine it to a large extent. Thus it is good to know the intentions of the leaders. This will be an exercise that will be developed tomorrow in this section. (F.R.)