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11711 Advantage CD
Time To Play Ball
With Europe
What does the advent
of the European
Monetary Union
mean to the Israeli
in the street or office?
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ADVANTAGE CD
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THOMAS O'DWYER
Special to The Jewsih News
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visitor from another planet
could be forgiven for think-
ing the United States must
be our next-door neighbor
and that Europe must be far, far away
across the Atlantic, a place of which
we know little and care less.
Recently, three historic economic
events took place that will change
such delusions for ever. First, the gov-
ernment unveiled its liberalization of
foreign currency dealings — albeit in
a watered-down version.
Second, the Deutsche
Morgan Grenfell bank issued
the first ever shekel-linked
bonds on the European mar-
ket, and was followed min-
utes later by a Merrill Lynch
issue of Euro-shekel-bonds.
The third measure, of huge
international importance, was
the European Union's deci-
sion that the monetary union
is going right ahead for 11
states, including France,
Germany and Italy.
Israel's financial liberaliza-
tion was announced for the
50th anniversary, the
European decision came just
after. Were the two events
mere coincidence? Some
Israel commentators said yes,
how could Israelis plan so far ahead —
but that is to take well-deserved credit
away from the Bank of Israel.
So what exactly does the coming of
the European monetary union mean
— and what does it mean to the
Israeli in the street or office? The
idea of uniting all the currencies of the
European Union states into a single
currency was fixed by the 1991 Treaty
of Maastricht and given a date —
1999. A year later, growing opposition
in some states triggered a wave of cur-
rency speculation and forced Britain
and Italy out of the exchange rate
mechanism — the trading bands that
were supposed to converge towards a
Thomas O'Dwyer is a writer for the
Jerusalem Post Foreign Service.
common currency rate.
Israel for years totally ignored the
coming of the European monetary
union — but then so did everyone
else, including the United States and
even most European businesses. Only
last year did the truth begin to dawn
— this European Union, which U.S.
Sen. Jesse Helms said "couldn't orga-
nize its way out of a wet paper bag,"
really does have an act together —
there is going to be a real coin called
the euro.
In 2002, euro notes go into
European pockets and all former tradi-
tional currencies will disappear. The
four outside the euro zone, Britain,
Denmark, Sweden and Greece, are
expected to join by then.
So what will change?
The euro won't mean much for the
man on the street. It will make life
simpler when you're on vacation,
investment portfolios will change at
the expense of dollar-based assets —
some rejigging is needed there. Israelis
invest mostly in Israel. In future, they
will have to diversify.
For the next economic level —
small businesses, entrepreneurs,
domestic traders — analysts see little
direct effect from Europe either. But
at the national level — banking,
importing and exporting, high finance
— the changes, and the shocks for the
unprepared, are going to be revolu-
tionary.
The EU is a global superpower; the
euro will give it global economic and
political authority. It is a market big-
ger than the U.S., and it has 21 per-
cent of world trade.
So with all this looking to a born-
again Europe, whatever happened to
the New Middle East and all the hype
K7:\