European Investment Outlook
As we saw at the beginning of our survey, there are so many fundamental
reasons why Europe doesn’t deserve to be sucked into the (rather
milder) US/Japanese recessionary vortex of 2001 that it’s
really rather hard to accept that it’s already happening in
practice.
Nobody with a clear head for figures should ever doubt that the
European economy has all the fundamental strengths on its side -
its growth rate, its savings rate, its low level of dependence on
technology, and all the rest.
Yet nobody with any common sense should doubt that the sheer electronic
interconnectivity of the world financial markets since the mid-1990s
has made it all but impossible for any one market to stay aloof
from damaging outside influences.
European Investment Outlook & America's genuine Charms
Besides, America has genuine charms of its own - not least, its political
sense of certainty. Its new president is going to be there for the
next three and a half years, come hell or high water. Compare that
absolute certainty with the muddled situation in Europe, where France
is becoming fed up with Germany, Germany is disillusioned with the
euro, and four of the five major nations (Britain, Germany, France,
Italy) face new elections or new governments very soon. Compare the
seasoned wisdom of Alan Greenspan at the Fed (19 years so far) with
the relative inexperience of whoever gets appointed to succeed Wim
Duisenberg at the European Central Bank (two years) - and they’re
still squabbling over that appointment, incidentally.
Europe has other problems that America doesn’t have. It
hasn’t sorted out the question of tax harmonisation. Its
15 members speak 11 languages. Its telecommunications infrastructure
is primitive in the south, and its farming crisis in the north
is getting steadily worse.
But the bottom line is, and still remains, that Europe is
a fundamentally ideal place for foreigners to invest.
European Investment Outlook - Stock Markets
Its stock markets are young compared with their US counterparts.
Its fast-growing private pensions system creates huge opportunities
for mutual funds all over the world. Its debt ratios are puny compared
with those of the States. Its extremely high level of self-sufficiency
(the EU supplies 75 per cent of its own imports) helps to insulate
it from malign trade influences.
Its currency is already the favourite denomination for international
corporate bond issues, having outstripped the dollar in January.
It hasn’t pinned its faith on new technology. Sooner or later,
all this will be recognised for its own merits. We hope.
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