At 14:39 17/12/01 +0100, you wrote:
(SK)
>> I'll bet you a good dinner that the Euro doesn't decline significantly
>> (5% max) against the US$, Br. Pound, or the Swiss Franc during the next
>> year.
(CR)
>Your prediction above may well be correct, but that won't have to be the
>merit of the Euro... (the USD may fall by itself, the CHF will have to be
>lowered artificially to prevent harm for our export industries and tourism,
>and a mix of both may apply to the GBP.)
Chris is right. The exchange rate of the GBP and CHF against the Euro is a
sideshow. It is swamped almost completely (approximately 10-fold) by the
value of the Euro against the US$.
A rough-and-ready idea of the relative strengths of trade capacity (and
also of exchange values via relative investment opportunities) may be given
by the Price-Waterhouse-Cooper list of the 50 most viable corporations. In
this, the US has 26 mentions, EC 12. UK 4 and CH 2. The ups and downs of
the US economy thus has a much more important effect on exchange rates.
I wouldn't bet on which way the Euro goes. It seems to be stabilised now
after many years of falling. As both the US and the EC economies seem flat
on their backs, the chances are that both will continue downhill for at
least a year or two (probably for a lot longer in my view). If they both
decline at the same rate then the leverage effect of the US economy means
that the Euro will rise. Even if the economies of France and Germany slow
down relative to the US then the Euro could still rise -- though by not so
much, of course. The economies of France and Germany would have to nosedive
before the Euro will fall further against the US$.
But that could happen in 2002! In both France and Germany, small companies
(still important for employment) will be taking a pasting next year. In
France, the 35-hour working week will be imposed on small companies.
Hitherto, they've escaped the draconian legislation. While large firms,
with their larger workforces, have been able to flex and adjust in all
sorts of ways so far to obviate the rigidity of the 35-hour week, small
firms can't possibly do so. In Germany, the mittelstand (predominantly
family-owned machine tool firms with high exports in good times) --
previously its pride and joy -- face huge problems of succession, being
unable to rationalise in the usual ways of the US or the UK, and will die
at a faster rate in 2002 than now, their owners simply dying or retiring.
We live in interesting times.
Keith Hudson
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Keith Hudson, Bath, England; e-mail: [EMAIL PROTECTED]
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