Outlook: Euro weakling
Friday 28 May 1999
Instead, we have had sluggish growth on the Continent in contrast to the stellar performance of the American economy, a blistering row between Oskar Lafontaine and the ECB about the level of interest rates, and general ineptitude on the part of Wim Duisenberg in handling the financial markets. Central banks have refused to treat it as a reserve currency and to cap it all, the politicians have started misbehaving again, giving the Italian government the thumbs up to relax its efforts on budget control. Admittedly, there have been some promising steps towards full financial market integration, but this is really the only part of the euro dream to have lived up to expectations.
The only time the markets have voted unambiguously for the currency was when Red Oskar resigned unexpectedly. The boost lasted less than a week. As the months pass, dollar parity looks all too possible. Which is why now might be the right time to switch out of dollar into euro assets. Don't believe the hysterical triumphalism of the eurosceptic press.
The European economy is not a busted flush. Britain, it should be noted, will be the weakest economy in Europe this year, projected to grow only half as fast as Germany, France and Italy. Nor has the Euro lost its fundamental appeal. Nor should the euro yet be written off as as a flawed endeavour.
It is important not to lose a sense of perspective. The slide in the euro since 1 January takes it back to the level it would have had last July if it had existed then. The pound declined just as much in a shorter period last summer, and has more than made up for it since.
None of this is to belittle the scale of the challenge facing the euro zone. The most serious worry must be the outlook for fiscal discipline, or lack of it.
The problems of co-ordinating budget and interest rate policies are clearly unresolved, both practically and politically. Just days before news of the new Italian budget fudge emerged, the ECB issued a stern warning that governments must get serious about cutting their underlying deficits if they ever wanted to have room to boost growth. But nor should we underestimate Europe's determination to make the project work. Sell Wall Street and bank the euro might be a reasonable punt right now.
- 1 What happens to your body when you give up sugar?
- 2 Tourist films plane's descent just metres above packed Caribbean beach
- 3 World Book Day: Boy 'excluded' from school after dressing up as Fifty Shades' Christian Grey
- 4 Have sex with your iPad thanks to the new sex toy no-one asked for
- 5 GamerGate: developer Tim Schafer provokes rage with joke about online gaming activists at industry awards
Harrison Ford plane crash: Actor will make full recovery thanks to 'beautifully executed' landing
Tourist films plane's descent just metres above packed Caribbean beach
Oxford whistleblower's attempt to protect young victim of a sadistic gang went unheeded
How Homer Simpson discovered the Higgs boson over a decade before scientists
The 'sex selfie stick' lets you FaceTime the inside of a vagina
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Durham Free School: 'Creationism taught at' free school facing closure
End of the licence fee: BBC to back radical overhaul of how it is funded
Elif Shafak: Turkish author warns against rise of British nationalism
Ex-head of MI6: 'We shouldn't kid ourselves that Russia is on a path to democracy'
Most people think legal tax avoidance is just as wrong as illegal tax evasion, poll suggests
iJobs Money & Business
£13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£12 - £15 Hourly Rate: Jemma Gent: In this role you will report to the Head of...
£8 per hour: Recruitment Genius: This Pension Specialist was established early...