Kosovo and EMU redux

Lisa & Ian Murray seamus at accessone.com
Fri Apr 30 21:19:53 PDT 1999

While it's becoming increasingly clear that the domestic imperatives in the US with regards to Kosovo are to placate Arms sales, we've paid little attention to realpolotik issues of immediate concern to the US, Britain and Germany; all of whom will suffer from full EMU 1/1/2002. Rants about imperialism, rogue empires etc. are adrenalizing but don't give credit to the deliberating strategies of fiscal and monetary cartels. In this regard, Kosovo provides a useful context for achieving a much more difficult task; destabilizing confidence in a market of 400 million consumers and their bank accounts and portfolios.

Ian Murray Seattle, WA


---------------------------------------------------------------------------- ----

The introduction of the euro could destabilise the economies of participating countries unless they tackle the problem of labour market inflexibility, said the Paris-based Organisation for Economic Co-operation and Development. The benefits of the single currency are neither automatic nor likely to come quickly. They would take years to achieve and and will require new policies from European governments. The OECD adds that it can find no example of a monetary union that has succeeded without political union. Labour mobility is seen as the key to the success of monetary union in America. But in the European Union only 5.5 million live outside there own state, including those seconded to Brussels. (Daily Telegraph 25 March 1999)

A European directive requires countries to include earnings from illegal as well as black economy activities in national accounts. This includes prostitution, drug dealing, illegal gambling, etc. Fencing stolen property should be included but not the theft itself. This will add a further 2.5% to our Gross Domestic Product. (Guardian 8 August 1998)

German production workers are some 50% more expensive than those in any other member of the Group of Seven leading industrial countries. Worse, because of economic and monetary union, there is little Germany can do about it on its own. The powerhouse of Europe has fallen into a trap. It's only escape is a week he Euro. German output per hour in manufacturing is not high enough to offset the cost disadvantage. Since companies must earn an internationally competitive return on capital, it is dispense with jobs in which workers are not productive enough to offset their cost. Companies are adjusting to high costs by dispensing with less productive activities and workers. And there has also been a huge rise in the stock of German investment abroad. Germany needs a weak Euro. It also needs sterling to enter the Euro-zone at as high a rate as possible. Few analysts noticed that Europe's most important economy was about to lock itself in at what seems to be a significantly overvalued real exchange rate. France, Germany's chief rival and prtner, has won game and set. But whether it goes on to win the match depends on how Germany responds to its plight. (Financial Times 31 March 1999)

In a survey by the respected polling organisation ICM, only 41% of businesses favoured joining the Euro. More than half of businesses said they saw no benefit in the larger markets that the Euro might provide, or in savings on exchange costs and avoiding foreign currency risks. Only 34% said the ability to compare prices across Europe would be a big advantage. (Financial Times 31 March 1999)

The fundamental structure of EMU is completely unsound. In its present form, lacking a centralized control over fiscal spending in each state, a single currency cannot possibly survive. Some might dispute this, however, there are those among the political elite of Europe with whom we have discussed this matter and they admit that this statement is fact. Nonetheless, EMU in its current form is not intended to be a final version of their grand design - only a mere stepping stone along the way to a fiscal union as Phase II followed by a political union in perhaps 20 years away. Their primary reason for not disclosing such a grand scheme is their fear that popular support has not yet been acquired. It is believed that with time, the people will grow accustomed to the idea and that a federalized EMU will indeed emerge by 2007 if not by 2004. It is this calling in the wild that has lured Tony Blair to surrender the proud British tradition for the grand idea of one Europe. (Martin A. Armstrong Princeton Economic Institute March 12th, 1999)

"The crunch will come in 3-4 years time. We have until then to persuade the City that joining the Euro will be bad for Britain. We have to persuade them that the City has always thrived on being independent and working successfully through global capitalism. Staying out of the Euro will give Britain stability in its economy which is better than pursuing stability in the markets through monetary union. The single currency would plunge us into boom and bust cycles as inappropriate single interest rate restrictions begin to bite. No one should be in any doubt that British participation in the single currency would destroy the City of London. It has partly been designed to do just that".(Bernard Connolly, the former head of the Commission unit responsible for monitoring and servicing the ERM, CIB meeting 29th March 1999)"

full story at http://www.kc3.co.uk/~dt/emu.htm

More information about the lbo-talk mailing list