Don’t look for growth in Germany or France to make up for shortfalls in any other parts of the world until the 1999 date for the introduction of a single currency in the European Union has been abandoned. That seems to be the message from US Treasury Secretary Robert Rubin, who in an interview with Reuters at the Democratic Party National Convention, on Wednesday questioned Europe’s headlong drive to meet tough fiscal targets for establishment of the single currency, and said it was unclear whether Germany and France would resume solid economic growth any time soon. As the only reason for introducing the Euro is purely a political one, intended to bind the disparate and centripetal cultures across Europe in ever closer union and makes no economic sense until the – again very disparate – economies of Europe are very much more homogeneous than they are likely to be before about 2015, abandonment of the 1999 date is likely to be put off as long as possible. Asked if Europe’s headlong drive for European Monetary Union with its tough economic targets was aggravating the situation, Rubin replied That’s the right question. Rubin was more sanguine about the outlook for Japan, but news from there is not encouraging. The expectation for the past six months has been for a rise in interest rates from the present figure of a mere 0.5%, but a survey of business confidence in August showed a decline compared with the previous quarter, implying that the economic recovery is slowing down already, which means that only tax cuts are available to get recovery back on track. The index for major businesses, measuring percentage of companies saying conditions are improving, less the percentage saying conditions are worsening – was minus seven where the Bank of Japan had expected zero. It was at minus three in the survey released in June. Wall Street thrives on bad news these days, all of which suggests that the outlook for three of America’s most important trading partners will postpone any crash in the share market for some time yet. But if you are trying to export computers, it looks as if you can cross much of Europe off your list for a couple of years, Japan will be soggy, and you are left to rely on the US and the Asian tiger economies – while building relationships for the next decade in major emerging markets such as India and Brazil.
