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Western Press Review: Assessing The Euro's Prospects

By Joel Blocker, Dora Slaba, and Anthony Georgieff

Prague, 4 January 1999 (RFE/RL) -- Officially launched on Friday (Jan. 1), the European Union's new single currency today faced its first test as currency markets around the world began judging its true worth. Western press commentary is still heavily focused on the euro's long-term as well as immediate prospects.

FINANCIAL TIMES: The euro leads to closer political cooperation

In an unusually long editorial today, Britain's Financial Times says that the birth of the euro "must inevitably lead to closer political cooperation, with profound consequences for the EU. There are two sets of reason for this," the paper says, "one practical and one historical."

"On a practical level," the FT writes, "it is obvious that the operations of the new European Central Bank (ECB) must be matched by closer cooperation over national fiscal policies...In considering, for example, the common problem of unemployment, ministers are bound to be interested in the interaction of their fiscal policies, the interest rates set by the ECB, and movements of the euro exchange rate."

"Second," the FT says, "many in Europe see this centralizing tendency, from an historical perspective, as desirable as well as inevitable....The euro creates an integrated economic bloc containing 290 million people and accounting for about a fifth of the world's (gross domestic product)....It seems inevitable that, over time, political structures will evolve to match such economic power..."

The editorial concludes: "Better political institutions in the EU are desirable, both to smooth the admission of new members and to make the Union strong and outward looking. But they must not be used to frustrate the effects of the open trading economy that will both improve general prosperity and help to preserve national and personal freedoms."

DIE PRESSE: The EU should not procrastinate in realizing expansion to the East

Austria's Die Presse daily welcomes the launching of the Euro, which it calls "the project of the century." The paper writes: "In realizing the (euro,) the continent has proved that it has overcome its (recent) Euro-sclerosis phase. For (many years), there have been debates about the single currency. (They ended when) the champagne corks began popping on New Year's Eve."

The papers adds: "The EU should not procrastinate so long in realizing its next major project -- expansion to the East....The (creation of the) euro and the Schengen (open-border) accords (among 10 nations) are actually creating a new experience for the citizens of Europe. Those traveling without frontier checks and with a currency (that is valid from Finland) to Sicily will feel like true Europeans."

NEUEN PRESS: The euro zone has proven to be an island of trust

The German newspaper Neuen Press, published in Hannover, says that the euro is creating a new "kind of stability in Europe. Portugal has the highest inflation rate of the 11 (euro) participants, and even there it is just 2.9 percent. Without the new currency we would be light years away from such a situation."

The editorial continues: "The turbulence predicted by some experts as a consequence of the introduction of the euro has not come to pass. On the contrary, the euro zone has proven to be an island of trust in the light of the financial crises in Asia, Russia and Latin America. The new currency has passed its first preliminary test."

TRIBUNE DE GENEVE: Monetary union is on the march

Switzerland's Tribune de Geneve carries a signed editorial by Serge Guertchakoff that says "the euro is the first baby of the new year. Even though it's not possible to caress it, the new money is nonetheless real for that." He continues: "True, until January 2002 the euro will remain untouchable. Still, as of January 1, the French franc, the lira and the Deutschmark are clinically dead. These monies are now no more than components of the euro." The commentary sums up: "As of now, monetary union is on the march. It will open the door to political unification."

DAGBLADET: Competition between the dollar and the euro may also threaten the stability of global financial markets

In Norway, the only Scandinavian nation not in the EU, two newspapers comment on the euro's launching. Dagbladet writes: "For many years, the world's economy has been dominated by the U.S. dollar and the Japanese Yen. The Euro is now a strong newcomer and it may become the dollar's first strong competitor in the post-World War Two period. But," the paper warns, "competition between the dollar and the euro may also threaten the stability of global financial markets."

AFTENPOSTEN: The euro is a new money that unites old Europe

Aftenposten says that "the euro is a new money that unites old Europe. It was born out of idealism, bitter historical memories and cold economic calculations. It shows us the importance of political leadership in the face of the world's hectic financial markets."

The editorial continues: "The decision made by the 11 EU states participating in the euro was a choice for more integration and less confrontation. In a world that has become increasingly dangerous and unpredictable financially, the euro protects (member states) better than if they had to stand on their own individually."

"Even when Euroland (that is, the 11 euro nations) becomes the world's second economic superpower, the U.S. dollar is likely to remain dominant (internationally). But with the euro, central banks and financial markets will have an alternative to enable them to reduce (financial) risks."

WASHINGTON POST: The euro will start to challenge the dollar

Two commentaries in U.S. dailies assess the euro's likely effect on the dollar's global pre-eminence. In the Washington Post, analyst C. Fred Bergsten says that "the euro will strengthen Europe both economically and politically, which is good news for the U.S.: At the same," he adds, "the euro will start to challenge the dollar as soon as the ECB and the new currency establish their credibility."

Bergsten's commentary goes on: "The shift from dollar hegemony to a bipolar monetary world (in the short run) could produce a sharp decline in the exchange rate of the dollar....For the longer run, the experience of a real rival will generate healthy competition for the U.S. across the world economy....It could even trigger a dollar crisis if Americans fail to keep their house in order."

He concludes: "Creation of the euro means that Europe ultimately will become a full equal of the U.S., at least in economic terms. The two economic superpowers will have to learn to function as partners.... If the U.S. and Europe can even begin to replicate Europe's achievements in economic integration and political cooperation, trans-Atlantic relations could be the global success story of the next 50 years."

LOS ANGELES TIMES: Will we get the good euro or the bad euro?

"Does the euro spell the end of the dollar?" asks analyst Walter Russell Mead in a commentary for the Los Angeles Times. He says that until now "the U.S. has been able to afford...large trade deficits and government budget deficits with so little pain (because) foreigners have been willing to hold large dollar balances." But, he adds, "the euro may end that happy state of affairs."

Mead goes on: "The euro is important because, for the first time since World War Two, there will be a money that, potentially, can challenge the dollar's role as the world's major currency....(But) the euro could be extremely beneficial to the U.S. and the world. If the new single currency unleashes, as some hope, a wave of growth in Europe, that would be good for exporters in the U.S. and Asia and good news for the whole world economy.

"So will we get the good euro or the bad euro?" Mead asks. "Too early to tell, and for people in journalism, that is bad news. This story is going to be around for a long time, and that means plenty more heavy lifting as we try to report this dull, complex but important subject in a way that is interesting, accurate and fair."