Summer 2001

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Letter from the Publisher

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Transatlantic Tango

It takes two to tango, and Europe and the United States are certainly trying to dance together to the same global music. Experts call it interdependence. But while they are attracted to each other by both destiny and necessity, the two sides of the Atlantic are not always in step. They often have different aspirations. Europe is in a socialistic mood these days, while the United States is passing through one of its more capitalist phases.

Perhaps they should change the tune - the one accompanying missile defense, for instance. In committing themselves to the program, President George W. Bush and his advisers may not have appreciated its destabilizing effects. Or was the purpose also to destabilize Europe's aspirations to its own defense system, which - even if it is kept within NATO - will oblige the United States to adjust to a new balance of forces? The European Union cannot afford to pay at the same time for its integration, for its enlargement, for the modernization of its military forces, and for missile defense as well. Meanwhile, NATO is being harmed.

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ECB Can Boost European Growth by Keeping In§ation Down

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Governor, Banque de France

Next January 1, the European single currency will become a tangible asset as euro coins and banknotes are introduced throughout a large area of the Continent. This massive and complex operation will be the largest monetary changeover the world has ever seen.

We should not forget, however, that from a historical point of view, the decisive event occurred on January 1, 1999, the birthdate of Europe's monetary union for all economic, monetary and institutional purposes. It is the irreversible nature of that development that has convinced an increasing number of economic players that the success of the euro is necessary for Europe.

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A More United Europe is Growing Economically Stronger

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President, De Nederlandsche Bank NV

With U.S. economic growth declining from the extraordinary peaks of recent years, the key question asked by international economists is this: will Europe be the white knight that rescues the world economy from a slowdown?

The background is certainly encouraging. Real Gross Domestic Product (GDP) in the euro area grew by 3.4 percent last year, the highest rate of the past ten years. The European Central Bank (ECB) has succeeded in keeping in§ation low and stable, and in each of the last three years employment has grown faster than in the United States. As a result, euro area unemployment fell from 11.6 percent in 1996 to 8.4 percent in March 2001. High fiscal deficits have been eradicated.

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The Great Debate Begins on Europe's Future

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Brussels Correspondent, European Affairs

Now that the German Chancellor, Gerhard Schroeder, and Lionel Jospin, the French Prime Minister, have offered their contributions, it should be possible to start the real debate on the future organization of Europe. It is not a question of dismissing the positions of the other member states, notably that of Britain, nor those of the Commission or the European Parliament.

Rather, the pronouncements of the French and German leaders have identified the two poles of the debate, between which it should now be possible to seek a sensible middle path, suitable for a European Union with 25 members or more.

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The Unconventional Case For a Stronger Euro

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Managing Director, Tudor Investment Corporation

Might there be reasons for the euro to strengthen against the dollar in the coming months, apart from the familiar considerations of economic growth and interest rate differentials between Europe and the United States?

Could longer-term non-macroeconomic factors such as demographic trends or restructuring shifts, for example, have an impact on the exchange rate between the two currencies? Or might it be in§uenced by a slowdown in the diversification of European investment that accompanied the introduction of the euro at the beginning of 1999?

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