January 1st 1999 marked the launch of a veritable financial union between European nations, which was geared towards increasing their share of the global village' s market, and decreasing the influence of the superpowers on both sides of the globe, Japan and more particularly the U.S..
Will the Euro supplement the dollar or will the rivalry lead to a never-ending competition between two bulls: Unfortunately isn't their only enough room for one bull, but for several bears as the cold war has proven us. But in the end it would seem that the rivalry though creating competition, henceforth its utility to the consumer, is nevertheless weakening both economic powers. One must not forget that Asia is barely recovering from the economic crisis and that a new form of protectionism, would either mean isolationism or the conquest of new markets; Africa is barely emerging, and South America has endured a terrible crisis, and the prospects do not seem bright despite the end of political turmoil in some countries and a newfound stability, or so they say. Indeed, Brazil has a new central bank governor who foresees a recovery of the crisis in the second half of the year, and Venezuela has a new president who hopes to maintain his promise of prosperous future for his people.
The rivalry between the U.S. and in Europe is ever so present and both show their weaknesses and strengths:
- The U.S. has been the subject of a great deal of criticism with regards to their foreign debt, the budget deficit, the lack of aid and benefits to disabled, unemployed families, as well as the high rate of poverty. Nevertheless, it would appear that these criticisms, in combination with the political controversy that dogged President Clinton' s term have not affected his economic policies, and Mr. Greenspan, the chairman of the Federal Reserve Board' s measures are enabling the U. S. to outperform many other Western countries: The GDP growth rate was 4.1%, its lowest since 1984, unemployment is at its lowest since 1970 at 4.3%, and the consumer price index rate is at 1.6% (its lowest since 1986) and interest rates are at their lowest since 1967, around 5.2% in order to encourage investment and boost the stock market. The overall situation seems bright for the U.S. in this first half of 1999.
- One should not nonetheless underestimate the feisty European temper, and the Euro lead by Germans and French. The value of the Euro has decreased recently, but isn't it a ploy to increase exports while disallowing Europeans to invest in foreign countries as prices overseas will have appreciated. Nevertheless, Europe finds itself in some political difficulties as a result of the discovery of corruption in the European legislation, as well as with the confrontation between Wim Duisenberg and Jean-Claude Trichet, since the former has decided not to resign after half of his term. A number of economists cite that the different mentalities, as well as political and economical infrastructures between countries of the E.U. will be its downfall. Nevertheless the decision of British Prime Minister Tony Blair to join the Euro, provided Britain keeps its ( 2 billion rebate, is a sure sign of the early success of this European venture.
At this time it would be unwise to predict the outcome if this battle, Europeans are outranking the Japanese, but will they succeed when it comes to competing with the only economic superpowerhouse, the U.S. and the dollar, which has maintained its tradition of international monetary standard for trade, in spite of the cancellation of the Bretton Woods treaty by Richard Milhouse Nixon in the early seventies. The dollar may not be as good as gold anymore, but it is still the first choice of most investors.