Monthly Archives: June 2005

Whew, What A Relief!

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The Bavarian cabinet is proposing a law allowing cars to be washed on Sundays and holidays. But only in the afternoons, you understand, so as not to interfere with church attendance. This is something like progress.

Now, since on average 7 percent of Germans attend services on Sundays, you may well ask what about the other 93 percent? And what of the residents for whom Friday or Saturday may be the week’s holy day? Well, you may well ask, but that doesn’t mean there are any good answers. But thank, er, Someone, for that old separation of church and state.

Another ‘euro’ sceptic

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Bloomberg’s Mathew Lynn has been pretty consistently skeptical about the workability of the common currency. Personally I find it difficult to disagree with the following:

“The euro, the common currency shared by 12 EU nations, will weaken considerably as Europe enters a long period of political instability. Recriminations from the collapse of the constitution will be played out over months, not days.

And the economics of integration that have dominated Europe for the last 30 years have come to an end. Forget convergence. The big trend in the next few years will be Europe’s economies going their own way, not with each other. In time, even the euro’s survival might be called into question.

“The initial reaction might be relatively muted because the markets had already discounted `no’ votes in both countries,” said Stuart Thomson, a fixed-income strategist at Charles Stanley Sutherlands in Edinburgh. “What it does do is put a stop to any thoughts of fiscal integration, because that was really the next step of the process. Without that, it is difficult to see what is underpinning the euro.””

Twenty Twenty Vision

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The press this morning are busily assimilating the result of yesterday’s Netherlands referendum. The FT reports on a survey by Dutch polling organisation Interview-NSS, which identified up to twenty different issues which influenced the no vote.

Top of the list the list was a fear that the Netherlands would lose influence in a Europe that would favour large countries.
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Another Day On Euro Watch

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I’ll keep tracking the euro again today, and updating as appropriate. I’ve just posted some stuff in the comments section of Afoe:

Looking at the newspapers the euro steadied up overnight, but seems to be on its way down again in Tokyo. As I write it is trading at $1.2194, ten minutes ago it was 1.2186.

Firstly during the night the dollar firmed:

“Against the euro, the dollar fell to $1.2211 at 9:50 a.m. in Tokyo, from $1.2179 late yesterday in New York, according to electronic currency-dealing system EBS. It was also at 108.64 yen, from 108.76. The dollar traded as high as $1.2160 per euro yesterday, the strongest since Sept. 20,”
Bloomberg.

The general consensus seems to be that the euro will rebound, since that is what the technical charts say it will do. Be these are not ‘normal’ trading circumstances and this view may not be appropriate.

Strategists at National Australia Bank hold what seems to me a reasonable perspective:

“Barring news of a sharp slowdown in the US, the euro is set to test 1.2000 and then 1.1760, the NAB strategists said, adding that the market focus is now turning to US non-farm payroll data for May to be released on Friday”.

I think we are in the hands of events, with a definite downside risk on the euro. So lets wait and see how they unfold.

Update 1: 9:30 CET. The euro is now staging a strong rally $1.2260 at the time of writing. Among other factors which may be affecting this is a speech by Dallas Fed President Richard Fisher which suggested the Fed tightening cycle may be nearly over. This is being widely interpreted as Greenspan testing the water. It is also something I have been arguing for the last couple of weeks: Europe’s weakness is now setting limits to monetary policy in the United States.

And It’s Another No

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The first exit polls have just been announced in the Netherlands. The first estimate is 63% No, 37% Yes. (I may have to update this, as I have no numbers on abstention).

Let the debate continue!

Update: The euro just broke under the $1.22 level, it is currently at $1.2179 in US trading. Tomorrow is going to be a long hard day somewhere. (22.14 CET).

Irritation.

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Over on Crooked Timber, Maria Farrell is being haunted by the sheer gaul of them, and consequently expressing her irritation with France and the French, not just

[f]or falling asleep at the wheel in 2002 and letting back in to the Elysee a fraud who has no vision for France, no values apart from expediency, and whose number one professional objective was using the office to stay out of jail.”

But also for pretty much everything else imaginable – so go read her post.
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He Would Say That Wouldn’t He II

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In some ways I think this story may run and run over the months to come. Bloomberg have an update on their earlier article. According to the latest account:

1/. The German Finance Ministry have declined to comment on the Stern report that discussions took place last week between Finance Minister Hans Eichel, Bundesbank President Axel Weber and various economists on a possible failure of European Monetary Union.
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Dutch referendum: some background

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Having been asked by AFOE to write a couple of posts for them in the coming weeks I am both honoured and horrified and apologize in advance for occasionally butchering the English language. A very short introduction: I am a Dutch translator now living in France after 30 odd years of residence in Belgium. I am totally incapable of producing fine scholarly essays but I can do my part of the vox populi pretty well? I hope.

To warm up I offer you some background relevant to the Dutch referendum before the official results start rolling in. First some figures, taken from a Eurostat news report (pdf) that was released today.

Dutch unemployment, while remaining well below the European average of 8,9%, has risen from 4.6% to 5%. By comparison, Poland has 17% unemployment and Ireland 4.2%. Eurostat also mentions that The Netherlands registered the highest relative increase in unemployment rates among the member states together with Portugal (6.5% to 7.2%) and Luxemburg (4.2% to 4.6%). Unemployment among young people in The Netherlands, while fairly high at 9.2%, is still modest compared to the EU average rate of 19%.
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He Would Say That Wouldn’t he

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For those who are not old enough to remember, these are the immortal words of Mandy Rice Davies.
Now throwing a link quickly back across the Atlantic, Dave Altig at Macro blog picked up my ECB post and added a response from Hans Eichel.

But, the plot does thicken a bit.
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