Thursday, June 09, 2005

EU Weakened

There is a great article in the Wall Street Journal today on the current state of the euro (subscription required) and the EU. The article ends with the following nugget from Banc of America Capital Management’s chief market strategist Joseph Quinlan.

The French and Dutch no votes "reinforce the view that Europe is a dithering dysfunctional family, unwilling and unable to make tough economic and political decisions," he said. "Europe is now more divided than united, weaker than stronger, and more inward than outward looking. Its stature as a global force in both diplomatic and economic senses is now in question."

I had the great opportunity to be working in Europe for almost 6 months about a year and a half ahead of the 1999 conversion to the euro. It was easily one of the most popular topics of dinner conversation among many of the Europeans with whom I was working. Of course, Clinton and Lewinsky and in their opinions (mostly correctly) that our fascination with the story was an endless source of amusement.

With respect to the euro, the concern I most often expressed was that introducing the euro before writing and ratifying the constitution was a classic example of putting the cart before the horse. While some shared my concern and agreed that the order was very dangerous, most insisted that everything would work out in the end and all would be well. Unfortunately for the Europeans, they are now suffering the delayed results of their earlier decisions.

Things may well work out in the end, but I’m not holding my breath for that. In fact, I’m even more convinced than ever that the EU will ultimately prove to be a rather dismal failure. First the UK established that you could be sorta-in sorta-out of the EU, several EU nations are now having economic problems because of the euro, and key proponents of the EU are not ratifying the EU constitution. Mr. Quinlan is right, Europe is certainly acting like a dysfunctional family these days and looks perfectly happy to continue this trend.


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