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Daily Telgraph leader 2000-04-25

Now Germany has begun to voice doubts about the single currency. Jurgen Donges, the senior economic adviser to the government, has spoken of a collapse in public confidence.

How different things seemed when the euro was launched, on January 1, 1999. Then, amid all the balloons and champagne, there were confident predictions that Europe’s new money would soon replace the dollar as the world’s reserve currency.

In Bombay, the only exchange to be trading on that day, the euro firmed slightly. Buoyed by this apparent success, British federalists rushed to tell us that we had made a terrible mistake by staying out. The pound, they claimed, would soon be bobbing around like a cork in the wake of an ocean liner.

To put it as neutrally as possible, the euro has failed to live up to this billing. Not only has it lost a fifth of its value against sterling; as the shadow foreign secretary, Francis Maude, wryly points out, it has also fallen against such mighty currencies as the Cuban peso and the North Korean won.

Last week, it touched another record low. What is going wrong?

The short answer is that none of the structural reform that was meant to have accompanied the euro’s introduction is taking place. Instead of deregulating their economies, France and Italy, in particular, are increasing their employment costs, while the European Commission continues to look for ways to harmonise our taxes.

The countries that made a special effort to meet the convergence criteria two years ago have since relaxed. It is as though they had sucked in their bellies to fasten their belts, and are now breathing out.

No wonder Prof Donges is worried: his fellow countrymen, who recently had the strongest currency in the world, have watched their savings lose 21 per cent of their value in 16 months.

Many Continentals are beginning to glare resentfully at Britain - and at Denmark, which is holding a referendum on EMU in September. The countries that had the wisdom to retain control over their own economies are looking increasingly vindicated.

Why should we give it all away?

German advisers losing faith in the euro
Daily Telegraph 2000-04-25

Leading German financial experts issued a warning that it would fall further in value unless there was urgent economic reform. This was a clear sign that opinion formers at the heart of the eurozone are turning against the 16-month-old single currency. A week after it hit a record low against the dollar, there are now fears on the Continent that it is facing a full-scale crisis of confidence.

The most damaging attack was made by Prof Jürgen Donges, who heads a committee of five independent ”wise men” which advises the German government on economic issues. He said that Germans had been told that the euro would be as strong as the mark, Europe’s most successful post-war currency. But they had been bitterly disappointed.

”Now people find the opposite,” the professor said. ”People are losing faith in the currency before they have even handled it for the first time” - a reference to January 2002 when euro notes and coins will go into circulation.

He said that for the euro to recover ground, Europe must undertake ”fundamental structural reforms” of its labour markets, social security and tax systems. He feared that countries such as Italy and France were not showing sufficient urgency.

”In Italy, one gets the impression that . . . reform has gone backwards since the country qualified for the euro,” he said.

The professor’s doubts are evidence of a loss of faith in the euro within the same German political and financial élites that pushed the case for a single currency throughout the Nineties.

Ruth Lea, the head of policy at the Institute of Directors, said that Prof Donges was a ”major player” whose remarks would be taken very seriously by Europe’s financial markets.

”I agree totally with his analysis. This is acutely embarrassing to the German government”.

Alex Hickman, campaigner manager for the anti-euro Business for Sterling, said that his group had been issuing similar warnings about Europe’s failure to reform and that it was very encouraging to hear them echoed by someone ”who is clearly a eurozone insider”.

He added: ”Foreign companies look to the eurozone and they see old-fashioned economies with double-digit unemployment, high taxes and a looming pension crisis. That is why they stay outside and come to Britain.”

David Heathcoat-Amory, the shadow chief secretary to the Treasury, said the comments showed that ”even the architects of the single currency are now having huge doubts about whether it will work”. He said the Prime Minister should recognise that being in favour in principle of euro entry was ”stupidity”.

The Treasury said the Government believed that the economies of Europe were reforming, but stressed that it would not be drawn into a ”running commentary” on the likelihood of Britain joining the euro.

Last week the euro fell to a record low of 93.5 cents.

Franz Christoph Zeitler, president of the Landeszentralbank Bayern, told Welt am Sonntag newspaper that he expected no quick improvement in the value of the single currency. ”Without fundamental reform, it will weaken further,” he said.

Recent opinion polls in Germany, where the public has always been suspicious that the new currency would lack the strength of the Deutschmark, have shown that public support for the euro has dipped to well under 50 per cent.

Supporters of the euro are concerned that Denmark, one of the four European Union countries that have not joined the single currency, might vote against entry in a referendum that is due to take place in September.

Full text

Daily Telegraph leader comment

Euron satte nytt bottenrekord 2000-04-25

German academics criticise 'weak' euro
Electronic Telegraph, 25 March 1999

The euro is so weak that its members should postpone the withdrawal of national banknotes and coins, say a group of leading German Euro-sceptics.

In a statement to be published today, a group of professors including Wilhelm Nölling, a former member of the Bundesbank board, says that far from proving "strong as a bear", the new currency is regarded as "weak as butter" by financiers because of its feeble political foundations.

The group, which last year appealed unsuccessfully to Germany's highest court to stop the introduction of the euro, says the turbulence surrounding its introduction has undermined public acceptance. It has illustrated the inability of politicians to give the euro the backing it needs.

The group says Britain is breaking the Maastricht Treaty by preparing to join the euro without first becoming a member of the European Monetary System. The professors say that even if euro members fail to agree on postponing the introduction of euro notes and coins, they should take the precaution of maintaining stocks of national currency, breaking the rule that they should be destroyed.

The group predicts that individual members of the euro may decide to leave it anyway, once the "straitjacket" of one interest rate for the whole single currency area becomes intolerable.

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