The title is: An Opportunity, not a Threat.
The major point he makes are:
1) Despite not being among the first waves to join (due to Britain history of boom and bust and current interest rate of 6% as compared to Europe's 3%), London is the de facto center of the euro, because it trades 32%, $640 billion, of the daily global foreign exchange market as compared with Germany's 5% and France's 4%. He boasts that while interest rates on the euro will be set in Frankfurt, the exchange rate will be set in London.
2) A strong euro will bring economic benefits to Europe, particularly if accompanied by economic reform. It would enable Europe to deal with global competition.
3) New Labor Britain should treat this as an opportunity rather than a threat as Thatcher did because more than 50% of Britain's trade is with Europe and rising. It is to Britain's interest to influence Europe's development. Britain will support European integration only where it makes sense where all will benefit, while in other areas national or regional concern will make more sense. The case of British beef is offered as an example how more can be achieved for Britain and Europe by working in alliance with others.
4) Rejecting as a caricature the choice for a future between American and European economic models, Blair proposed a third way to face the challenges of globalization in which "economic dynamism" and social justice can live together.
Blair ended with the assertion that Britain, A European nation but with powerful ties to the U.S., can help shape the debate of Europe future.
The message to America is clear: Britain can be detached from and yet influential in Europe while it will continue to be America's special agent.
Henry C.K. Liu
L O N D O N, Jan 5 — Europe might be
basking in the glow of the successful
launch of its single currency, but shadows
are lengthening over its economy.
A string of grim reports this week has
confirmed the severe damage inflicted on
manufacturers by Asia’s slump and reinforced
expectations that the new-born European
Central Bank will cut interest rates before the
end of the quarter.
Economists Remain Confident
But with consumer spending proving resilient,
many economists remain confident that the 11
members of the euro zone will pull out of the
downturn within months, skirting recession, and
enjoy a rebound in growth in the second half of
the year.
“There is a cyclical downturn which is quite
vicious, especially in the manufacturing sector,
but that should be overcome sometime in the
spring,” Joachim Fels of Morgan Stanley Dean
Witter in London.
Gordon Moffat, the Brussels-based director
for international affairs at Europe’s steel
producers’ trade group, Eurofer, hopes the
optimism is justified.
The steel industry, which employs more than
280,000 people is Europe, has borne the brunt
of the economic crisis that engulfed Asia and
Russia.
Asian Crisis Hurts Exports
Asia, which used to take nearly a third of
Europe’s steel exports, bought 56 percent less
steel last year.
What’s more, Asian steelmakers targeted
Europe as an outlet for products unwanted at
home and managed to boost their share of the
market from four percent to 25 percent in 1998.
The result was a plunge in prices followed in
the fourth quarter by a production cut of about
10 percent that Moffat said could be repeated in
1999. As many as 40,000 European steel jobs
could be at risk.
“We don’t expect any rapid improvement,”
Moffat said. “Even if the situation stabilises in
Asia this year, there won’t be any pick up for
several years to come.”
Nevertheless, the outlook is not entirely
gloomy. European steel producers have filed
anti-dumping suits against several countries that
Moffat said should help slow import penetration.
“We don’t expect much growth in demand in
the first part of this year, but demand
nevertheless should be relatively satisfactory and
it should pick up in the second half if the
economic situation improves,” he said.
Spending Cushions Slowdown
The plight of manufacturers was reflected on
Monday in depressing purchasing managers’
reports from Germany, Italy, Sweden and
Britain.
Household spending has so far cushioned the
industrial slowdown but economists say
consumer confidence could take a knock if the
gradual improvement in Europe’s labour market
is reversed.
Friday’s December jobs report from
Germany, which accounts for a third of
Euroland output, could be crucial, with
economists braced for a sharp deterioration.
Industrial output figures next Tuesday are also
expected to show a sharp drop.
“There’s lots of gloomy news to come in the
next few weeks,” said Ellen van der Gulick of
U.S. investment bank JP Morgan, whose
euro-zone economic activity indicator released
on Monday showed overall output stagnating in
November.
Morgan does not expect the region as a
whole to suffer a quarter of negative growth and
believes things will start gradually looking up
towards the end of this quarter.
International Environment Is
Critical
As in 1998, the international environment will be
critical.
Although exports account for only about 10
percent of the new euroland’s GDP, German
economics institute DIW said on Tuesday weak
global demand would shave one percentage
point off growth in 1999. The Berlin-based
think tank is forecasting 1.9 percent growth,
down from 2.8 percent last year.
Economists fret that flickering hopes of a
recovery in Japan primed by government
spending would be snuffed out if the yen’s
dizzying climb overnight were to continue.
And while there are signs that Asia might be
touching bottom, van der Gulick said spreading
weakness in Latin America — and Britain—was
a worry. “The external drag to growth in the
euro area is not yet behind us,” she said.
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