Money: Who's celebrating the euro?
Review of '99: a new currency lost its way, but financiers, oilmen and internet entrepreneurs struck lucky
Sunday 26 December 1999
The blame for the euro's sickly start cannot be laid entirely at the door of its many political enemies. A frosty environment combining falling interest rates in Europe and strong growth in the US has exposed the euro to the odd chill. But Mr Duisenberg's bouncers would be instructed to turn away many of the political figures who have conspired to make the youngster's first year as difficult as possible.
For instance, Mr Duisenberg will not have forgotten the role of Oskar Lafontaine, the former German finance minister. His constant calls for lower European interest rates did much to undermine the fledgling currency's ability to stand on its own feet, free from the interference of do-gooding European politicians. Mr Duisenberg has already wreaked his revenge, declaring that he had "no feelings" for Mr Lafontaine. On news of Mr Lafontaine's departure, the euro promptly jumped two cents against the dollar, enabling Mr Duisenberg finally to do Mr Lafontaine's bidding and cut interest rates.
If he has nothing better to do, perhaps Mr Lafontaine could hook up with Gerhard Schroder, the German Chancellor, who would also be at a loose end. These former political allies could take the opportunity to iron out the differences that prompted Mr Lafontaine's resignation from Mr Schroder's government, another incident that blighted the euro's first year.
He quit after his taxation plans incurred the wrath of Germany's corporate sector, but his relationship with Mr Schroder had already been strained by the ongoing feud between Mr Duisenberg and Mr Lafontaine.
That was nine months ago. Mr Schroder has since felt the rough end of Mr Duisenberg's tongue and may feel more sympathy for his former colleague. It was Mr Schroder's decision to offer taxpayers' money to help save Germany's biggest builder, Philip Holzmann, from bankruptcy that caused the problem. The rescue "does not enhance the image we want to have of an increasingly market-driven economy", said Mr Duisenberg, mindful of the debilitating effect that an interventionist policy like this would have on the market's perception of the euro. Mr Schroder's reluctance to accept the supremacy of the global market has further been demonstrated by his stand against Vodafone's attempts to take over Germany's Mannesmann.
Jacques Santer would have to make other plans, too. Confidence in the new currency was hardly helped last March when Mr Santer and the rest of the European Commission resigned over charges of corruption.
Romano Prodi, his successor as head of the Commission, has also managed to undermine a project he so zealously espouses. Last June, in his previous guise as Italian prime minister, Mr Prodi did the euro no favours at all when he suggested that his country would jettison the currency if its competitiveness were affected. His subsequent protestations that he had been misinterpreted failed to ease fears that the currency was falling apart and the euro fell sharply.
With friends like these, it is not as if the euro needs its many enemies. In the UK, they include the massed ranks of right-wing Eurosceptics who have done their best to demean the project. Discounting the influence of William Hague, the beleaguered Tory leader whose chances of forming the next government dwindle by the day, the most important Eurosceptic in Britain is probably Rupert Murdoch. His mouthpiece at The Sun, editor David Yelland, first branded Oskar Lafontaine "The most dangerous man in Europe" and then dubbed Tony Blair "The most dangerous man in Britain". This constant carping has done little to encourage Mr Blair to take the plunge and signal a referendum on sterling membership of the euro - a move that would do wonders for the project's credibility.
At least Slobodan Milosevic is used to being a social pariah. The Yugoslav president would be about as likely to get an invitation to the party as Mr Yelland. His Kosovo campaign, launched shortly after the single currency's inception, prompted the biggest allied military operation in Europe since the Second World War. Between March and June, the euro fell as fast as the Nato bombs, hit by fears of the impact on European budget deficits - and national security.
But enough of the party-poopers. Helping the evening swing would be the exporters whose foreign exchange risk was wiped out in an instant with the birth of the euro. Furthermore, European companies selling goods outside the Continent have prospered from the euro's depreciation, which makes their products more competitive abroad.
There would be a few famous faces present too. Roberto Colaninno, chief executive of Olivetti, managed to raise 9.4bn euros to contribute to his takeover of Telecom Italia. One of the people Mr Colaninno will thank for preventing even further falls in the euro is Kiichi Miyazawa. It was the Japanese finance ministry he runs that prompted the Bank of Japan to buy euros in June, becoming the first central bank to do so. This played a vital part in ensuring that the euro did not fall below parity with the dollar.
Greek prime minister Costas Simitis would be invited as a reward for his achievement in bringing down domestic inflation to 2.1 per cent. That feat should be enough to enable Greece to swap the drachma for the euro within a couple of years. A number of other countries toasting the baby would include Poland, the Czech Republic, Cyprus, Estonia, Slovenia and Hungary.
And perhaps Tony Blair would make an appearance, although he would prefer to come unannounced. The Prime Minister is having to juggle his own enthusiasm for the euro with the antipathy of his electorate, 80 per cent of whom are opp-osed to ditching the pound, according to the annual British Social Attitudes Survey. It would take a masked ball to tempt Mr Blair, although his Chancellor might be more willing.
Siobhan Almond is a staff writer in the London news room of Bloomberg.
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