The British position is in fact more severe than that of the dollar. Current City opinion is that the pound needs to stay weak against other currencies to enable increased exports to establish themselves not only against the euro’s exports but against the domestic marketrs inside the eurozone.
Open Europe today quotes Spiegel as reporting “European Commission fears serious debt crisis in 13 EU member states
Der Spiegel reports that the European Commission is fearing a serious debt crisis in 13 EU member states, classing some countries as "high risk" including, Spain, the Netherlands, Greece, Ireland, Slovakia, Slovenia, Malta and Cyprus, and others as suffering from excessive deficits and debt, including the UK, Romania, the Czech Republic, Latvia and Lithuania.”
Then there is the question about who gets which important portfolios in a new Commission and the Franco-German axis is seeking increased influence there and in the light of the guerrilla war even now being waged by them against Britain, it can hardly be to our liking !
Christina
FINANCIAL TIMES
14.10.09
ECB faces challenge over rising euro
By Ralph Atkins in Frankfurt
Just when eurozone economic prospects have turned for the better, a new policy challenge is facing the European Central Bank: an unwelcome appreciation of the euro.
Europe's single currency has been on a steadily rising trend against the dollar for six months, threatening to stifle growth by hitting export prospects.
The immediate danger might not seem great: recent increases have not taken the euro to last year's peak of almost $1.60. The worry for the ECB is that the latest rise marks the start of a new phase for the global economy in which the eurozone will bear the brunt of a global adjustment process.
A weaker dollar may help reduce the US's yawning current account deficit, but it would hit the eurozone at a time when export growth appears to be powering the recovery from recession.
Gilles Moec, European economist at Deutsche Bank, says: "There is a genuine concern within the ECB about the strength of the euro because, more than ever, the eurozone is dependent on overseas demand to gain traction."
The eurozone has long had a broadly balanced current account. But as the European Commission noted in its latest report on the eurozone: "While the euro area as a whole has not contributed to global imbalances, the resolution of these imbalances could affect it significantly."
Even without the euro's rise, growth prospects looked weak. Economists at Unicredit estimate that the 2 per cent appreciation in the euro's trade-weighted index since July will cut 0.2 percentage points off eurozone growth over two years.
So far European political reaction has been mute. One explanation is that France - where politicians are not slow to complain about a rising currency - has seen one of the region's best export performances, with car sales boosted by governments' "cash-for-clunkers" schemes.
But recent trends have moved Jean-Claude Trichet, ECB president, to escalate his verbal interventions. Initially he stressed the US's publicly stated interest in a strong dollar. Then he warned that "excess volatility and disorderly movements" would have "adverse implications" for economies. At the International Monetary Fund meetings in Istanbul this month, he said that a rebalancing of the global economy "does not at all" imply "a change in the bilateral position of the dollar and the euro".
Last week, after an ECB meeting in Venice, Mr Trichet went further, saying that authorities "on both sides of the Atlantic" would "co-operate as appropriate", hinting that heavier-handed action was possible.
In fact, Mr Trichet has stuck largely to quoting from statements agreed by finance ministers and central bank governors from G7 industrial nations, and has refused to comment on possible further steps. Still, Unicredit's Aurelio Maccario says the ECB president's rhetoric suggests a "growing dissatisfaction on the euro's performance". [And Ambrose Evans Pritchard has forecat trouble for the euro towards the turn of the year or early spring -cs]
What might the ECB do next? In the US, the Treasury takes the lead on exchange rates. In the eurozone, the central bank has a freer hand. Although finance ministers can set guidelines, in practice they have never done so, leaving decisions to the ECB.
But the Frankfurt-based institution knows its limitations. Its record of using verbal intervention is not impressive. In November 2004 and November 2007, Mr Trichet complained of "brutal" exchange rate movements, but the impact on the euro-dollar exchange was short-lived. More successful was co-ordinated financial intervention in 2000, taken with the US Federal Reserve and other central banks, to support a weak euro. The action marked a turning point in the euro's fortunes.
Policy on the euro in coming months would probably only work if agreed with the US. But despite public statements from US leaders about a "strong dollar", the country's adjustment process is being made easier by the dollar's weakness. The ECB is finding that the US's currency is its problem.
FINANCIAL TIMES Blog 14.10.09
EU governments hunt for top jobs on European Commission
Tony Barber
Ask a minister in a European Union government what post their country hopes to get in the next European Commission, and the response is the same every time - something important to do with the economy. Well, you can’t blame people for not hurrying to step into the shoes of Leonard Orban, the Romanian commissioner for multilingualism.
On the other hand, there aren’t enough top economic jobs for Commission president José Manuel Barroso to satisfy everyone. Truth to tell, the Commission looks too big with 27 members. But that’s the way it is, and that’s the way it will stay under the EU’s Lisbon treaty. A guaranteed seat on the Commission seems a simple, visible way of making a country’s citizens feel connected to the EU.
The main four economic portfolios in Barroso’s outgoing Commission have been - in no particular order - competition, the internal market, trade, and economic and monetary affairs. These have been occupied by the Netherlands, Ireland, Britain and Spain respectively. By contrast, France has held two lesser posts (first transport, then justice, freedom and security), and Germany has dropped almost completely out of sight in the post of enterprise and industry.
As Barroso puts together his new team, France and Germany are in the hunt for really big jobs and feel no doubt that they deserve them because of their relatively diminished status in the outgoing Commission. The French and Germans want to play a much more direct role in shaping the EU’s economic and financial policies as the EU struggles to emerge from recession, rewrites its rules on financial regulation and defends its industries in world markets. France is said to desire the internal market job on the Commission, and Germany would like something equally prominent.
All this is causing some nervousness in Britain and a few like-minded countries that the next Commission will be less free market-oriented than its predecessor. In response I would make two points. First, this is the spirit of the age - you can expect nothing less after the recent near-meltdown of the western world’s financial system and the associated regulatory failures.
But secondly, it just does not follow that to give a top economic dossier to France or Germany means that the Commission will be wrenched in the direction of some manically illiberal étatisme and fiendishly pro-Volkswagen industrial policy. To take one excellent example, Pascal Lamy, the Frenchman who served as trade commissioner from 1999 to 2004, was a robust defender of free trade and now is head of the World Trade Organisation. The same would be true if the next French commissioner were someone like Christine Lagarde, who at present is President Nicolas Sarkozy’s finance minister (she is still a possible choice, some think, even though it looks as if Sarkozy is going for Michel Barnier).
EU commissioners, at their best, are like US Supreme Court justices. When a president picks a judge to sit on America’s highest court, everyone’s first thought is, “Here we go, a blatant political appointment designed to push the Court in a certain ideological direction”. Then, more often than not, the nominee causes a surprise by putting the court’s interests first and acting independently. So it can be at the Commission, where the institutional culture of independence from political pressure is stronger than many on the outside assume.
Posts
