Since Monday, comments in this section on the problems of the euro and Economic and Monetary Union call for a follow-up. Some aspects have indeed remained in the shadows.
A structural weakness of the dollar? I shall begin with a subject of astonishment. In the many statements on the exchange ratio between the dollar and the euro, I don't recall anyone placing emphasis on the structural weakness of the dollar. The permanent deficit of the American trade balance has had the effect of the volume of dollars outside the United States being impressive (according to a former French finance minister, it corresponds to 60% of dollars in circulation). This expatriated monetary mass represents a time-bomb for the stability of the international monetary system. It has not exploded as all countries of the world are happy to accumulate dollars and preciously keep them in their reserves. Should a considerable number of countries suddenly decide to exchange their dollars for other currencies, the value of the American currency would crumble. It is probably this fear that leads creditor countries not to do so, as no one wants to see the value of its reserves diminish. Thus, imbalances persist and worsen. But it is unhealthy and cannot last forever. The euro does not have this structural weakness, and the ECB should ensure that the euro's role as reserve currency does not develop excessively.
In favour of the British presence. Two remarks concern Jacques Delors' suggestions on Economic and Monetary Union. Their presentation would be incomplete were I not to add that he is optimistic regarding the forthcoming participation of the United Kingdom in the euro. The idea of providing EMU with the form of "enhanced co-operation" (see this section in yesterday's bulletin) in no way aims to set up an institutional construction without the British. On the contrary, Mr. Delors considers that Tony Blair will lead his country into the euro zone. He said: "Tony Blair will have to overcome obstacles before winning. In my opinion, he'll win". The second remark concerns the requirement that EMU should speak with a single voice for its economic chapter, in the same way it speaks with a single voice (that of the President of the ECB) for its monetary aspect. According to Jacques Delors: the spokesman for EMU, both to the outside world and in the permanent dialogue with the president of the ECB, should be the president of the European Commission "as he is there every day". He will, of course, have to act in the framework of the guidelines set by the ministers of the euro zone within the Eurogroup; but the president of the Eurogroup changes every six months, that of the Commission is there for five years.
He who prepared the arrival of the euro. Other subject. Some newspapers have had the fortunate idea of letting the first "Mr. Euro" speak, the one who gained that nickname before the birth of the single currency: I'm referring to Yves-Thibault de Silguy, European Commission for Economic and Monetary Affairs in the previous Commission. That he should be in favour of the euro, should surprise no one. But the reasons and explanations are interesting, coming from he who, from 1995 to 1999, prepared its arrival. He said: "Today, nobody can deny that it had to be done. When the Italian lira lost 40% of its value in relation to the mark or the franc, between 1992 and 1995, the Germans could no longer sell a Mercedes in Italy, nor the French a single calf. In a single market, that's not tenable. And let no one come tell me that these devaluations were the expression of Italian monetary sovereignty, whereas they were the counter-shock of the crisis of the Mexican peso…It had been a long time since our countries had lost all monetary sovereignty. Today, sharing it amongst themselves, Europeans have regained it".
And here is what he had to say regarding relations between the euro and the dollar: "The majority of our trade is conducted within the Union. The value of the dollar matters little in these transactions. As proof, I would compare the Afghan crisis with that of the Gulf, for the effect on our currency and our purchasing ;power: one upset these, the other not. For Europeans, it is much more important to have low inflation than a strong currency, as steep price rises have a direct effect on our purses, whereas currency variations leave us cold. Let's get rid of our old complexes! And finally cease suffering stock market and economic jumps that arrive to us directly from the other side of the Atlantic".
At a more general level, Mr. de Silguy criticises governments that claim that "if all goes wrong, it's always because of Brussels. By speaking this way, they end-up making part of public opinion detest European construction. Unloved by some, it is then misunderstood by others. It's a question of generation: the fifty-odd year olds that are leading us never learnt Europe at school, and that shows!". (F.R.)