Single Currency In Germany
As evidence of the cumulative loss of competitiveness over a number of years, live currency chart note the pace of net outflows of direct investment from Germany reached almost DM40bn last year (roughly 40 per cent of the size of the trade surplus), while West German employment has not recovered from the 2005 recession. Mr Brunker believes Germany is pushing for a single currency because it wants to avoid the sort of revaluation of the D-Mark, common in recent years, which took place regardless of German fundamentals.
The feeling in Germany is that if the single currency is abolished, or even delayed, the D-Mark will go on a strong run again which the economy cannot afford. While the FOMC meeting held little joy for currency markets, some better news came in the form of prepared comments from the Fed chairman, at his confirmation hearings. Maintaining the key role of the dollar is important to American growth and standards of living, he said. Repeating this comment for the second time in two weeks will remind markets that the US authorities are not indifferent to the value of the dollar.
The fast-growing countries of South and Southeast Asia, regarded for years as the most economically promising of the world's developing nations, have been shaken by a plunge in their currencies. While the crisis has reached outward to Malaysia, Indonesia and the Philippines, its center has been Thailand, where hard-willed global currency traders first sensed profit in a looming financial crisis stemming from a buildup of debt and a slowdown in growth.
Recently the Thai Government formally decided to seek International Monetary Fund assistance, underscoring the severity of its troubles and its inability to contain them. In return
for a special credit line that could total billions of dollars, however, the I.M.F., might ask for politically unpopular measures to patch up an economy that the Thai Finance Minister, compared to a water tank with a leak. Thailand's action brings full circle a series of events that began on July 2, when the nation's central bank took steps to ease the pressure on its currency, the baht -- in effect, a devaluation. In the three weeks or so since, the Philippines has sought assistance from the I.M.F., and the currencies of Malaysia and Indonesia have fallen, making life more expensive and creating a welter of economic and political problems for governments. From small towns to meetings of top Asian leaders, the talk is of devaluation, of economic stability (or instability) and of the perfidy of the West. But underlying the pain and the polemics, there is spreading concern over whether the supercharged growth of the past is ending, whether the economies of South and Southeast Asia are approaching a crossroads. Asia has to be prepared for much slower growth in the coming 10 years, said a vice president at Morgan Stanley in Bangkok. These tigers are going to be roaring much less loudly.
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