creating a unified trading zone with a GDP to match that of the US. One likely consequence, posits the Economist, is that the euro could become a real alternative to the US dollar on a world scale, which would make it harder for the United States to run unlimited current-account deficits and to exercise unchallenged leadership of the international financial system.
Entry requests were reviewed at a summit meeting in May 1998, and the G-11 were officially named; Britain, Denmark and Sweden have chosen not to join the euro at this time – and Greece didn’t make the cut. At the same meeting Wim Duisenberg, a Dutchman, was named as head of the Central Bank, making him every bit as powerful as America’s Alan Greenspan, head of the Federal Reserve Bank.
In any event, focusing on the EMU entry criteria has spurred countries to greater budgetary sobriety across Europe and in turn helped drive interest rates down – all good news for investors. On the corporate front, the introduction of the euro should cut the cost of transacting cross-border business in Europe. Companies won’t have to give their banks the spread on foreign exchange transactions, and they won’t have to pay for currency hedges to lock in their prices. Moreover, the euro should stimulate cross-border efficiencies, allowing companies to expand, consolidate, restructure or relocate without regard to currency differences. No wonder investors are getting excited.
Banks, insurers and finance houses are expected to be among the first companies to go regional with cross-border product offerings in the single currency, which will make for greater consumer choice and mobility within Europe. Right now it’s theoretically possible to take out a mortgage in one currency to buy a property in another, but the foreign exchange risks are daunting for the average consumer. With the euro, that risk is eliminated. The increasing pace of preparations for Y2K and the euro are making software houses an irresistible investment opportunity, too.
With zero hour approaching, things are suddenly falling into place for the euro. Against expectations, European economies started picking up in 1998, after almost a decade of sluggish performance which threatened to scupper the currency’s introduction. What’s more, the Economist reports that European Commissioner for Monetary Affairs Yves-Thibault de Silguy thinks that the spending on preparations for the euro, coming on top of Y2K spending, will give Europe’s economies a further boost.
Borders, What Borders?
For cross-border travellers in Europe, things are just returning to where they were a century ago, when it was possible to wander across the Continent without a passport. Only recently have border controls between many European countries been dropped (under the EU’s Schengen agreement), but already some countries are wondering what they have let themselves in for.
Since October 1997, flights between Italy, France, Germany, the Benelux countries, Portugal, Spain, Denmark, Sweden and Finland have had domestic status, while land border controls are virtually nonexistent. The big worry now is that there are no secondary lines of defence to pick up illegal or undesirable immigrants – once they have made it into one of the countries, they can travel unimpeded to any of the others with little fear of being caught at border crossings.
Europeans and their governments are already daunted by the prospect of innocent economic migrants and asylum seekers turning up on their doorsteps from Africa and the near East. Many refugees in 1997 and 1998 were Iraqi or Turkish Kurds, who have been arriving in increasing numbers and applying for political asylum. EU countries are afraid things could get worse: recent years have seen sudden influxes from Albania and Bosnia; and the risk of mass migration from the countries of North Africa is ever present, particularly with Algeria virtually in a state of civil war.
But much more worrying are the activities of organized criminals who now make big money smuggling illegal immigrants, as well as the more traditional contraband of drugs, guns and money. According to Professor Ernesto Savona, director of Italy’s Transcrime research institute, the Albanian Mafia has now grown so powerful that it has already chased the Italian Mafia, once its patron and big brother, right out of the lucrative business of trafficking migrants. ‘Albanian-organized crime has its foot in the door, which is Italy, and this means people, prostitution and drugs.’1 It will be tough for EU countries to hold on to the Schengen ideal of free movement of people without more stringent immigration and asylum laws.
Expect Europe’s open-borders policy to come under a lot of pressure within the Schengen group, while the UK looks on smugly.
Immigration If you’re looking for a hot-button topic in Europe, immigration has long been a reliable choice and is likely to stay that way well into the next millennium. Recently deceased British politician Enoch Powell made his name thirty years ago with his notorious ‘rivers of blood’ speech on immigration, while in France the National Front party of Jean-Marie Le Pen now commands around 15.2 per cent of French votes on an anti-immigrant platform of ‘France for the French’. It’s all about culture (with a small c), jobs, and welfare. The presence of immigrants who are really, seriously different can create huge culture shock, especially when they are there in large numbers and form their own self-contained communities. For instance, Germany, Europe’s biggest receiver of immigrants, has around 7 million immigrants out of a population of 82 million.
Every European country has its unique immigrant population profile – which itself begs the question of how many generations it takes for immigrants to be classified as locals. The UK, France, Belgium and the Netherlands have people from their former colonies, Germany has Turks and Eastern Europeans, most northern European countries have people from southern Europe, and southern Europe, which used to lose migrants to the north, is now having to deal with the unaccustomed problem of absorbing immigrants from Africa and the Balkans. Apart from the smells of unfamiliar cooking and the sound of strange languages, the big fears are either that the immigrants will work, taking the jobs of local people and driving down pay levels, or that they won’t work but instead will live on benefit payments.
Slow-to-change communities are feeling the effects of the economic upheavals that are sweeping the world and devastating traditional industries, leaving legions of unemployed. It’s all too easy for bewildered Europeans to point the finger of blame at immigrants, who are often concentrated in areas where the hardest-hit local people live too. And it’s all too tempting for extremist parties to play on voters’ fears, forcing even moderate politicians to take a harder line on immigration.
For example, the left-wing government of French Prime Minister Lionel Jospin caused a furore among its own supporters as it examined residency requests from 140,000 illegal immigrants. The government is aiming to modify tough immigration regulations passed by previous conservative governments under pressure from the far-right National Front, which wants to send all immigrants home. Jospin’s new law is easier on immigrants who have French-born children or who have been in the country for many years, but is tougher on recent arrivals and bachelors.
All across Europe, governments will have a tough job balancing conflicting factors. On one hand, they wish to stay true to their humanitarian traditions and tackle the practical task of integrating new arrivals. And on the other hand, they are mindful of the risk of social conflict that is likely if they overstretch the capacity of local people to absorb newcomers.
So far, the immigration debate has been conducted largely in terms of rights and responsibilities, of economic burdens, of redistributing an economic cake that is assumed to be of fixed size. But in the early years of the coming millennium, we can expect to see the focus start to shift towards finding ways to help immigration contribute to the economies of receiving countries.
The fact is that Europe needs immigrants. Birth rates across Europe are low and the native populations of most European countries are ageing and shrinking. As people live longer and the demographic bulge of baby boomers starts heading towards retirement, Europe
