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U.S.-Dollar-Collapse: Will EU and Other World Powers Try to Intervene?
With the euro extremely close to the $1.60 mark last week, it looks like much of the world's patience regarding the dollar's rapid slide may be ending in the near future. Jean-Claude Juncker, the Premierminister of Luxembourg as well as Chairman of the EU financial ministers, has already discussed with U.S President George W. Bush steps to halt the falling currency. Now he suggests, "financial markets and other actors" might still not have understood the message of the G7 meeting.
"Sharp fluctuations in major currencies are a threat to economic and financial stability in the world." This was the core of the G7 accord. As far as Europe is concerned, there are dangers of rising protectionism, that Mr. Juncker has also explained publicly. American experts in Washington, on the other hand, seem to be content with the situation, since it raises the prices of foreign imports into the United States, while American goods keep becoming cheaper and more competitive around the world. This, as Americans see it, protects jobs in their country. It also creates new ones: the European Airbus group EADS is working hard, trying to build manufacturing plants in the dollar zone. On the other hand, foreign investments in Europe are scaled back: 269 billion Euro during the last 2 years, according to European Central Bank statistics.
The results have already surfaced. The most dramatic problems can be observed in the two Southern EU states of Greece and Spain: Greece is suffering from almost 15% in GDP deficits, and in Spain, the number is over 9%. Germany and Holland have
been prosperous. Other EU states report less than rosy pictures.
The United States and its known economic problems are only one part of the overall picture: Central banks in Asia as well as companies in the Middle East have invested huge amounts of money in Europe - often in EU securities - as an alternative to U.S. investments. And at present, it does not look like that trend is coming to an end.
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