Europe's New Economy: Competition by Integration - Page 2© Peter Weber
Page 2
Sep 3, 2000
The UMTS bargain
Despite the currency’s weakness European politicians are however demonstrating their confidence in the economy saying that the Euro will sooner or later recover, returning above parity with the Dollar. Until today two major arguments have kept Duisenberg from stronger steps in defense of the currency: the risk of throttling the weak economic recovery and the concern about the budget of countries with exorbitant debt such as Italy and Belgium. But now the upward economic trend in most countries is getting stronger and most national governments will soon get relief for their financial situation thanks to the revenues from the auction of UMTS-telecommunication licenses.
Early this year the British government has raised 39 billion Euro, but in August the record was touched in Germany, where the auction of six UMTS-licenses valid twenty years has brought the finance minister an extra income of over 50 billion Euro. In autumn the next auctions will follow in France, Italy and Austria, where expectations are already on the rise. The German finance minister Hans Eichel (SPD) has promised that the revenues will be used to reduce the state debt and the partners expect that his Italian colleague will do just the same. Then the resulting relief for the national budgets and higher growth rates could soon indicate Mr. Duisenberg that some stronger steps in defense of the currency are no more barred.
The NASDAQ challenge
The stock markets have been the first to realize that Europe is catching up. Investors have saluted the progress in integration with soaring quotes all over the continent. In several countries the nearing of the Euro has produced some kind of initial spark setting the stock markets on fire. A number of new technology firms have put themselves in evidence, attracting the interest of a new generation of online-investors .
By the mid90s it seemed as if Europe was hopelessly falling behind the astounding progress of US technology firms. While the NASDAQ produced hundreds of success stories each year, in Germany, for instance, technology stocks were still extremely rare and the market for venture capital was almost not existent. As a result the Europeans who wanted to invest in hi-tech stocks were mostly forced to buy in the United States, on Wall Street and especially on the NASDAQ. The pull of US technology shares is still attracting investment capital from all over the world, but mostly from Europe. The money invested in the States must be converted into Dollar and this has surely contributed to weaken the Euro.
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