The Euro, the New Money
-Holger Steltzner, Germany
French newspapers greeted the new
European currency with headlines proclaiming "Vive l' Euro"-long live the euro.
In contrast "Farewell to the Mark" was the message on the front pages of many
German newspapers at the turn of the year. Delight and curiosity on one side, sadness and
the pain of leave-taking on the other? Does this formula describe the moods of the people
on both sides of the Rhine at the historic moment of European Monetary Union? No. At two
o'clock in the morning on New Year's day, in temperatures of minus five degrees Celsius,
small groups of people were to be found celebrating as if Germany had won the World Cup.
Such scenes were repeated at cash dispensers around the country early on the first euro
morning. IN all twelve countries of the eurozone, people streamed to their banks wanting
to get their hands on the new banknote and coins. Buying a loaf of bread, a taxi journey,
filling up at the local petrol station became major events. The smallest errand seemed an
adventure. Converting, multiplying, dividing-everything had to be double-checked. Everyone
was interested and curious Long line formed in banks. Even in Germany, the country with
the most euro-skeptics, the euro has been well received. Obviously, Germans consider
themselves Europeans much more than most observers would have liked to concede until quite
recently.
Naturally it will take some time before the
300 million people in the euro countries-Austria, Belgium, Finland, France, Germany,
Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain-become accustomed
to the new price relationships in euros. What's cheap? What's expensive?/ How much do you
tip? No one can say how long people will convert euros into their old currency. For
Germans, conversion into Marks is relatively easy, because they only need to roughly
multiply their euro bill by two. People in France, Greece and Italy have to reach for
their pocket calculators if they want to convert euros into francs, drachmas, or lire.
The Euro is much more than a
currency", said Wim Duisenberg, president of the European Central Bank, recently. And
he is right. It is the symbol and also the engine of further European integration.. The
system of European Central Banks has accomplished a major feat with the successful
introduction of euro banknotes and coins. From the technically complex printing of the
banknotes to the logistical masterpiece of distributing the new currency, the largest
exchange operation in history went off incredibly smoothly. In the long term, however,
what is more important than the successful distribution of euro cash is that the experts
in Frankfurt am Main, the "City of the euro", maintain the right interest rate
policy for the eurozone. This is no easy task. Europe's currency guardians in Frankfurt's
Eurotower have to fix a single interest rate for twelve countries that have very different
economic potentials and political interests. It should thus come as no surprise that there
has been frequent criticism of the new European Central Bank, ECB, and its monetary policy
in the three years since the euro's introduction on financial markets.
Despite all the justified complaints about
the lack of transparency on monetary policy decisions, even the harshest critics must
admit that the ECB has fully accomplished its mission. At approximately 2.5%, inflation in
the eurozone is lower than ever before on average in these countries. The value of money
is stable in the single currency area. The euro's approximately 25% fall in value against
the dollar is due less to the central bank's policy and far more a reflection of the
market's view that the eurozone lacks economic dynamism. However, the ECB has not always
succeeded in communicating its complicated two-pillar monetary policy strategy-a
mysterious blend of money supply control and inflation targets. Professional ECB watchers
at investment banks regularly complain that the ECB is unpredictable. This is
understandable, particularly from the perspective of English-speaking countries, where Wim
Duisenberg is compared with Alan Greespan, the president of the US Federal Reserve. This
is an erroneous comparison. First, Europe's federal structures can't be compared with
America's financial center. Second, the individuals concerned could not be more different.
In the world of finance, Greenspan is considered the grand wizard of global markets
because he always prepares important players for changes in interest rate policy
relatively early on. This makes it easier for market participants to bet on the interest
rate decisions of the Federal Reserve-and enables professional investors to make
speculative gains.
Unlike the United States: This, however,
can't be a central bank's main responsibility. Because America's central bank is meant not
only to keep prices stable, but also to secure growth and employment, it reduces or
increases interest rates swiftly and substantially depending on the state of the economy.
By contrast, Duisenberg and the ECB have no mandate to attempt to influence the economic
cycle. Unlike its European counterpart, the Federal Reserve does not have a clear monetary
policy strategy, just the skills of Alan Greenspan. No one knows what will happen when the
75-year old head of the Federal Reserve retires in a few years.
There are important differences between
America and Europe. In the eurozones it is the banks that a play a decisive role, in
America the financial markets. Yet when it comes to markets Europe is also catching up.
After the advent of monetary union at
the beginning of 1999, there was an acceleration in the trend towards and
internationalization of investors' security holdings. Today it is perfectly natural for
German investors to compare the value of Volkswagen stock not only with BMW or
DaimlerChrysler shares, but also with those of Fiat and Renault. Professional investors
now attach greater importance to the Euro Stoxx50 index than the DAX, the German share
index as a benchmark of stock-market performance. A few figures underline the rapid and
profound change in investment behavior that have occurred. Since 1987, the proportion of
foreign stocks in the securities portfolios of German private investors has risen from
some 20% to 41%. According to the calculations by the German Bundesbank, the volume of
cross border securities transactions has risen from 4.5% of gross domestic product at the
beginning of the 1970s to 450% in the year 2000.
For understandable reasons, many Germans do
not find it particularly easy to give up the mark. It should not be forgotten, however,
that monetary union has answered the concerns that were expressed by some European
partners in the run-up to German reunification that Germany could attain too much economic
weight within the EU as a result of a strong mark and the Bundesbank.
More than a new currency: Why is the euro
more than just a new currency? Because it secures the European ties of a reunified
Germany. The euro is the embodiment of European integration. More countries will join the
EU, and more countries will receive the euro. Its significance is also reaching far beyond
the common currency area. Accordingly, we can only endorse the New Year's greetings
emblazoned across large posters in the windows of a small bank in provincial Brittany:
"Bonne Anne'e l' Euro".
The author heads the financial
section of the Frankfurter Allgemeine Zeitung. Deutschland Nr. E4 1/2002. Embassy of
Germany in Kathmandu.
Nepal-France Bilateral Relations
I hope the trade gap in between Nepal and France diminishes or
disappears
-Mr. Claude Ambrosini, French Ambassador,
Nepal
We are gathered here this evening on the occasion of the
General Assembly of the Franco-Nepalese Chamber of Commerce, which held its working
session this afternoon. In the course of the meeting, the members went ahead with the
election of the new committee. I greet this evening all the responsible persons and the
members, former and the new ones, and of course its reelected President whom I
congratulate. I wish them every success assuring them of my support.
You may count on my support also in your
contacts and steps with the Nepalese concerned authorities.
I make every endeavor, whenever possible, to
be present at the meeting my British colleague fruitfully organizes between the FNCCI, the
various bi-national chambers and the representatives of the Nepalese government.
In the course of these meetings I have been
able to appreciate the dynamics of the Federation and of the Chambers. However, I was also
able to realize how deep your worries were, not only when it came to negotiating with the
Government on the changes in the Legislation and the rules which you consider necessary in
order to carry out your activities but also how serious they were in the present state of
crisis and insecurity Nepal is facing.
Regarding the grave problem of the armed
fight we are all concerned with, when I say all I mean also all the countries, friends of
Nepal who stand by the government and the people of Nepal in this ordeal. I wish to seize
this opportunity given to me this evening to recall that "France, as soon as the news
was known, immediately condemned the murderous attacks launched during the night of 16 to
17 February last by the Maoists rebels which killed dozens of victims mainly among the
security forces.
In his declaration the official speaker of
the Ministry of the Foreign Affairs has again called for "resuming the dialogue"
and putting a "stop" to "violence".
To come back to our Franco-Nepalese Chamber
of Commerce, I can but encourage them to develop the Economic and Commercial relations
between our two countries. The Commercial trade leans in favor of France. I rejoice of
course for my country, but hoping that the gap diminishes or even disappeared, which would
signal an improvement in the Nepalese economy.
Yet the figures remain low and I am convinced
that a big effort must be made on both the sides in the field of publicity and
communication.
Last year, various delegations of Nepalese
businessmen have traveled to France not mentioning the one which accompanied Prime
Minister Koirala during his official visit in March last. I have in mind the one, which
participated in the Paris Fair, and that of the exhibitors at the International Tea Fair
held last October. I was in Paris at that time and took this advantage to visit the
Nepalese booth which was put up and attractive. I am convinced that this type of
initiative should be followed up.
I had visited last year in Kathmandu the
Himalaya 2001 Exhibition and had noted the absence of French Exhibitors, this year, thanks
to your president, to his colleagues of the Franco-Nepalese Chamber of Commerce and to the
Economic and the Commercial sections of our embassy, the French concerns will be
represented. I believe this is the way we should work together to reinforce our relations.
And finally, I was just informed by the
Alliance Francaise Director that Nepal's School Leaving Certificate, SLC board, has
included the French language as an optional subject.
I thank you and wish you a peasant evening. |
