the European Union is going to really hate the French
French are starting to get a bad reputation in Europe. The only
reason for this is that instead of being "communitaire" they are
acting in the interests of their countrymen. The French are said
to be the worst offenders when it comes to implementing EU "laws."
An example that is especially apt to the British is the refusal
to import British beef because they do not regard British beef as
being fully clear of BSE. Ignoring for the moment the role of the
French in pushing for greater regulation of all other countries,
there is a welcome, if obstinate, cussedness in the French government’s
behaviour. However, this is not the case if you are sharing a currency
with the French, as we shall see later.
Euro has not been doing well on the money markets. This was evident
after a first ecstatic week when the great and the good claimed
that the Euro was obviously good because it increased in price.
Then they claimed that it was obviously good because it declined
in price. The simple fact is that the Euro is bad not because it
is too high or too low but that it is reliant on various economies
and, crucially, on various central banks. The last factor seems
to have been overlooked by most analysts who take at face value
the control of the European Central
Bank (ECB), a government monopoly of money with absolutely no
democratic comeback. Now many readers are probably private currency
advocates, as am I, but the ECB combines the worse of both private
and public monetary models. They have overlooked one factor; the
power to print money is not at the moment in the hands of the ECB
but in the hands of the national banks. This may explain some of
the weakness of the Euro, and will explain the toilet paper status
of it once the markets work out what is being done.
Euro is not, as many mistakenly warn, a unique experiment. A federal
currency has been tried before, but not surprisingly the Eurocrats
are unwilling to point this out. In the dying days of Yugoslavia,
a remarkably similar set up was put in place as it is with the Euro.
The Yugoslav Central Bank had power to determine the money supply
in the framework of a tight anti-inflationary policy, but the power
to print the notes had been delegated to the states. The monetary
squeeze was problematic for Serbia, in that Slobodan Milosovic had
made extravagant promises in relation to state employees and pensioners,
and the money to pay them was not there. The usual way out, to set
the printing presses rolling was not available to him, or was it?
The fact was that although officially not allowed to print any more
than their allocated share of notes, there was nothing stopping
the Serbian government from printing the required currency in private.
Although the extra money had fed through, partially, to the Dinar’s
exchange rate, it was not until the bad faith of the Serbian government
had been exposed that the Dinari collapsed in value.
attempt to compare Yugoslavia to Europe flounders on the fact that
Europe is somewhat more developed and sophisticated than Yugoslavia.
This does not mean that the pressures on Europe are less intense.
The European Central Bank, it is true, has set the amount of currency
that is allowed to be printed, but the national banks are to do
the printing. This has special potency when considering the case
of France. France’s Socialist government has recently insisted that
all employees are to have a maximum thirty-five hour week. Other
areas have also been legislated on, covering taxes, holidays and
minimum wages, most to the detriment of the employer. What should
should shoot up. What did happen? Unemployment
has gone down. This has, to say the least, baffled many economic
commentators. As any Catholic or Evangelical Protestant knows, miracles
are not explicable by rational analysis alone, and in this sense,
the French recovery is definitely miraculous. Some commentators
claimed that the economic laws of gravity do not apply to France,
or were wrong in the first place. Some have said that that the laws
were more employers friendly than appear at first. Others have tried
to say that with an upturn in the economic cycle scheduled; they
did not need to worry about employer friendly legislation.