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The Euro: Crucial Step for a Future Superpower?
In January, 11 nations launched the euro, the new European currency. What does this
crucial event mean for the rest of the world?
By Melvin Rhodes
Recently, only four mohnths apart,
I made two trips to England. Harold Wilson, British prime minister 1964-1970 and
1974-1976, noted the volatility of governments, nations and economies when he once
observed, "A week is a long time in politics." Four months, in the political realm,
can be an eternity, as I discovered when reflecting on my second trip.
On my earlier visit, many people in England and on the Continent seemed unaware of
the euro. Today, a few months later, the new currency has obviously gained a much
wider awareness. European journalism is dominated by news of the euro: its launch,
exchange rates, its effect on members and nonmembers of the European Community, its
relationship with the growing world recession, the building momentum for full political
union on the heels of monetary union, and Europe's relationship with the world's
main trading currency, the American dollar.
Newsweek's recent "Euroland" special issue brought up the discussion with
these words: "In January, the world will start getting used to a new currency. Whether
you love the euro or hate it, know this: nothing so big has ever happened before."
The euro may not be big news on American television, but its impact on America could
be greater than any issue currently under discussion. To understand why, we need
to consider the economic and political ramifications of the euro.
Changes in Dominant Currency
Before World War II the pound sterling was the dominant currency of world trade.
Prices of goods traded between nations that had nothing to do with Great Britain
were often quoted in pounds because businessmen the world over knew the value of
the pound. The Bank of England issued the pound. A saying during the last century,
and for much of this one, was "It's as safe as the Bank of England."
After World War II the U.S. dollar became the major trading currency, but the pound
continued as a reserve currency and was the principal monetary unit of trade between
nations of the British Commonwealth (one quarter of the world's countries at the
time) and some others that had close ties to Britain.
By the early 1970s, however, sterling was no longer able to carry the burden of being
a major international trading currency. Britain was too vulnerable to currency speculation,
pressures that built up whenever uncertainty over its economy grew evident. The dollar,
from that point, became the leading currency.
Today the U.S. dollar is used the world over. Although not the legal tender of many
nations, those nations use dollars when trading with other countries. Individuals
hoard dollars when their own country's money is unsettled. High inflation rates in
Russia and many parts of South America, Africa, the Caribbean and the Pacific have
led people of many lands to trust the U.S. currency more than their own. The dollar
is also the preferred currency of international drug dealers, Merchants in one of
the world's biggest businesses.
Because the dollar is so readily accepted, it has enabled its citizens to overspend,
a situation exacerbated in recent months by the collapse of U.S. export markets in
Asia. The latest monthly trade deficit was more than $15 billion. This means
America spent $15 billion more on foreign goods than it sold.
This situation means that more than half the dollars in circulation are outside of
the United States. This makes America vulnerable, as Britain was in the 25 years
after World War II. If a sudden international loss of confidence in America occurred
(spurred, for example, by uncertainty over the presidency, another Persian Gulf conflict,
a Y2K or pre-Y2K panic or the like), billions of dollars could suddenly be dumped,
forcing the value of the dollar down against other currencies. This would result
in higher prices for U.S. consumers.
A New World Currency
Enter the euro. The fledgling European currency is the only credible alternative
to the dollar. The economic output of the nations adopting the euro is almost as
great as America's. If the economies of European nations considering adopting the
euro are also included, it is greater.
More important, the currencies of the 11 countries that support the euro have been
more stable than the American dollar during the last few years. This little-known
fact was first realized by international-currency speculator George Soros, who transferred
billions of dollars into European currencies in September 1998. Even Japan, the third-largest
economy, has been selling U.S. Treasury bonds to put more assets into euro-based
economies.
Other developments have included a Persian Gulf leader suggesting that the world
price of oil should be fixed in euros, not dollars, a decision that would raise gas
prices at American pumps should the dollar fall in value. The euro is in its early
days yet, but any uncertainty about the United States could trigger major changes
on currency markets. Remember what Harold Wilson said: A week is a long time in politics.
The biggest international currency market is still in London. This could change if
Britain doesn't adopt the euro. Some fear that Frankfurt, headquarters of the new
European Central Bank, could gradually oust London from its preeminent role. This
fear is behind the pressure from many British bankers and businessmen for Britain
to adopt the euro as soon as possible. If a decision were made to enter the single-currency
union, Britain could be ready in as little as eight months.
Britain is faced with a dilemma. If it does not switch to the euro, it risks economic
decline on the periphery of the European Union. If it belatedly adopts the euro,
it will also risk economic decline on the periphery of Europe. Yes, you did read
that right. Joining could be as detrimental as not joining. Pressure will be put
on Euro members to harmonize rates of taxation so that no country will have an advantage
over any other. (In America that is something that not even Washington, D.C., has
tried to force on the 50 states.) This would mean higher taxes on British business,
greatly reducing their competitive edge.
Wakeup Call for the U.S.
The New Republic was the first mainstream American magazine to warn of
the dangers of the euro to both Britain and the United States.
"The pragmatic British, as ever, remain wallflowers at the continental dance. But
the British see something close up that the Americans would do well to understand
from afar. The reason that the French in particular are prepared to countenance such
risks is that they seek to convert a united Europe into an alternative world power
to the United States.
"The economic union of Europe is, in Paris's eyes, a mere prelude to political
union. And the point of political union is to lessen American influence and involvement
on the continent, and elsewhere, by means of an eventual attempt to construct a defense
and foreign policy that may well be antagonistic to American interests. The more
honest europhiles are not coy about this. Nor should they be. But neither should
Americans be complacent. If Britain especially is subsumed within a common European
defense policy, the United States will lose its only truly reliable European ally"
(Jan. 25, emphasis added).
The push for full political union has intensified after the genuine accomplishment
of economic union. Note the attitude of London's Daily Telegraph: "We should
be grateful to Joschka Fischer, the German foreign minister, for pressing the cause
of European federalism with an honesty that puts British ministers to shame. In an
impassioned speech to the European Parliament yesterday, he warned that the European
Union would suffer 'an institutional heart attackÇ' unless it moved rapidly to full
political integration.
"The launch of the euro, he said, had set up a 'dynamic' that would inevitably
sweep aside the current political arrangements of Europe. 'The introduction of the
single currency is not primarily an economic but rather a sovereign and thus eminently
political act,' he said, adding: 'Political union must be our lodestar from now on'
" (Jan. 13, emphasis added).
Slow and Steady
In many ways Europe is a citadel, a fortress being built slowly but surely, made
to last. That's why the European dream of unity has taken so long to achieve. Past
attempts to unify Europe have been through force. This time it is being accomplished
peacefully. It takes time as sensitivities of many countries are taken into account.
It is understandable that many U.S. citizens yawn at talk of European unity. Remembering
how quickly the Continental Congress brought the original 13 colonies together, they
think that if Europeans were really going to unite they would have done so long ago.
This failure to understand the difference between Europe and America has led some
to believe Europe will never unite.
Europeans have a long history. If it takes a few decades to unite, so be it. They
have been working on it for 50 years; now they are in the final stages. The roof
is finally being put on the citadel.
In the light of recent developments in Europe, it is important to note a particularly
pertinent prophecy, in Revelation 17:12: "The ten horns which you saw are ten kings
who have received no kingdom as yet, but they receive authority for one hour as kings
with the beast."
Acceptance and implementation of the euro came slowly and systematically. Europeans
have taken more than 40 years to come to this point since the European Economic Community
was founded in 1957. It was the Maastricht Treaty earlier this decade that pledged
member countries to form a single currency.
Many nations needed to discuss it first. Two, France and Denmark, put it to a referendum,
allowing the people to decide directly. For some years each country wanting to join
had to adopt economic policies that would enable it to qualify for membership in
the economic union. It was a carefully orchestrated, well-planned project. One mistake
and the whole thing might have collapsed.
Prophecy Waiting for Fulfillment?
Revelation 17:12 suggests the adoption of the euro could also be the means of
achieving full political union. Ten nations (or small groups of nations) will decide
on full political union.
From the wording of this verse and in view of the euro precedent, it appears these
10 nations may simultaneously hold elections to decide on the issue of European political
union and to choose the governments that will forge them into the United States of
Europe. This would mean 10 countries changing their leaders at the same time with
the intent that the leaders then choose an overall federal leader.
At some point a union of nations, led by 10 leaders and a supreme leader, will transform
into the aggressive beast power prophesied in the Scriptures. Perhaps this transformation
will be driven by external threats that a democratic system cannot handle.
The New Republic is right. A new superpower is in the final stages of coming
together. Two centuries of Anglo-Saxon domination of the globe may draw to a close.
The world will never be the same.
Suggested callout #2: "The single currency cannot but help but pose a financial and
economic challenge to Washington, and that eventually will take on a political weight
that neither side now wishes to contemplate" (William Pfaff, The Los Angeles Times),
Note #2: The Economist quote suggested for the drophead is from the lead
editorial in the October 11th issue, 1997.
© 1999-2022 United Church of God, an International
Association
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