Unbundling of Europe's financial empires will help promote greater confidence in the region
'Euro bulls disappointed again' runs the headline. If it wasn't so sad, it would be funny. Who are these bulls? There must be a few somewhere ' poor, starved specimens snorting away on the edges of the herd. But it is quite a reputational hazard owning up to being one. You'd get knocked over by the chorus of 'moos'.
Policymakers profess themselves at a loss to understand the relentless downward drift of the single currency. The US dollar is certainly overvalued and, as European Central Bank (ECB) vice president Christian Noyer says, the euro is very undervalued. The introduction of the single currency in January has been, by all accounts, a stupendous success, despite minor hitches and little embarrassments.
The conduct of eurozone monetary policy hasn't been particularly bad, just a little uptight and inept. It doesn't help that the ECB president, Wim Duisenberg, likes to try to ridicule currency traders. News of his somewhat delayed departure from next July cruelly boosted the currency, but only momentarily. After a little spurt, it slumped again. The recent political fudge that allowed Germany, the largest eurozone economy, to escape the provisions of the very economic Stability Pact it championed has not helped. Last year, Ireland got rapped for trying to do a deal. Yet the final outcome may be even harder for Germany. It will battle to fulfill its new commitment to balance its total budget deficit ' federal, regional and local ' by 2004.
Part of the problem with all things euro is that its champions are desperate to punch well above their weight. So, although there is clearly room for the euro to appreciate, it is stretching it to say that the euro-dollar exchange rate could damage the world economy. Mr Noyer started from a firm base but then moved onto shakier ground, suggesting US protectionism and its inflexible economy were the real problem.
This kind of bravado goes down a storm in Brussels but in Washington and Wall Street it is a mere irritation. The euro bulls were disappointed again. In a sense, their frustration is understandable. Europe has plenty going for it but world dominance is just a little ambitious for the moment. It should concentrate on putting its own house in order. That means throwing its considerable resources into opening up markets, streamlining financial infrastructure and loosening labour markets. European companies are finally getting the hang of corporate governance. Certainly, they all talk about it. But, emulating their supposed mentors in the 'Anglo-Saxon' economies, many do just that. Last month, Ericsson announced the biggest corporate loss in the history of Sweden, but added it was still paying big bonuses to its managers. ABB, the Swiss-Swedish engineering colossus, announced a £691 million loss, alongside an investigation into £100m of pension overpayments to two former chief executives.
Enron has demonstrated that corporate greed is not a cultural thing. Indeed, US criticism of other corporate governance creeds has become more muted in the aftermath. But Europe still has a long way to go down the path of unbundling the financial empires that dominate its markets, and the currency, like the companies, suffers because of it. Investors like simple accountability, transparency and liquidity. They are happy to pay executives for outstanding performance but rewarding failure is pointless. Instead of looking for global political conspiracies, Mr Noyer and his fellow European policymakers should focus on getting back to basics. Then, perhaps, euro bulls will not be disappointed.
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