The Euro: Crucial Step for a Future Superpower?

In January, 11 nations launched the euro, the new European currency. What does this crucial event mean for the rest of the world?

By Melvin Rhodes

Recently, only four mohnths apart, I made two trips to England. Harold Wilson, British prime minister 1964-1970 and 1974-1976, noted the volatility of governments, nations and economies when he once observed, "A week is a long time in politics." Four months, in the political realm, can be an eternity, as I discovered when reflecting on my second trip.

On my earlier visit, many people in England and on the Continent seemed unaware of the euro. Today, a few months later, the new currency has obviously gained a much wider awareness. European journalism is dominated by news of the euro: its launch, exchange rates, its effect on members and nonmembers of the European Community, its relationship with the growing world recession, the building momentum for full political union on the heels of monetary union, and Europe's relationship with the world's main trading currency, the American dollar.

Newsweek's recent "Euroland" special issue brought up the discussion with these words: "In January, the world will start getting used to a new currency. Whether you love the euro or hate it, know this: nothing so big has ever happened before."

The euro may not be big news on American television, but its impact on America could be greater than any issue currently under discussion. To understand why, we need to consider the economic and political ramifications of the euro.

Changes in Dominant Currency

Before World War II the pound sterling was the dominant currency of world trade. Prices of goods traded between nations that had nothing to do with Great Britain were often quoted in pounds because businessmen the world over knew the value of the pound. The Bank of England issued the pound. A saying during the last century, and for much of this one, was "It's as safe as the Bank of England."

After World War II the U.S. dollar became the major trading currency, but the pound continued as a reserve currency and was the principal monetary unit of trade between nations of the British Commonwealth (one quarter of the world's countries at the time) and some others that had close ties to Britain.

By the early 1970s, however, sterling was no longer able to carry the burden of being a major international trading currency. Britain was too vulnerable to currency speculation, pressures that built up whenever uncertainty over its economy grew evident. The dollar, from that point, became the leading currency.

Today the U.S. dollar is used the world over. Although not the legal tender of many nations, those nations use dollars when trading with other countries. Individuals hoard dollars when their own country's money is unsettled. High inflation rates in Russia and many parts of South America, Africa, the Caribbean and the Pacific have led people of many lands to trust the U.S. currency more than their own. The dollar is also the preferred currency of international drug dealers, Merchants in one of the world's biggest businesses.

Because the dollar is so readily accepted, it has enabled its citizens to overspend, a situation exacerbated in recent months by the collapse of U.S. export markets in Asia. The latest monthly trade deficit was more than $15 billion. This means America spent $15 billion more on foreign goods than it sold.

This situation means that more than half the dollars in circulation are outside of the United States. This makes America vulnerable, as Britain was in the 25 years after World War II. If a sudden international loss of confidence in America occurred (spurred, for example, by uncertainty over the presidency, another Persian Gulf conflict, a Y2K or pre-Y2K panic or the like), billions of dollars could suddenly be dumped, forcing the value of the dollar down against other currencies. This would result in higher prices for U.S. consumers.

A New World Currency

Enter the euro. The fledgling European currency is the only credible alternative to the dollar. The economic output of the nations adopting the euro is almost as great as America's. If the economies of European nations considering adopting the euro are also included, it is greater.

More important, the currencies of the 11 countries that support the euro have been more stable than the American dollar during the last few years. This little-known fact was first realized by international-currency speculator George Soros, who transferred billions of dollars into European currencies in September 1998. Even Japan, the third-largest economy, has been selling U.S. Treasury bonds to put more assets into euro-based economies.

Other developments have included a Persian Gulf leader suggesting that the world price of oil should be fixed in euros, not dollars, a decision that would raise gas prices at American pumps should the dollar fall in value. The euro is in its early days yet, but any uncertainty about the United States could trigger major changes on currency markets. Remember what Harold Wilson said: A week is a long time in politics.

The biggest international currency market is still in London. This could change if Britain doesn't adopt the euro. Some fear that Frankfurt, headquarters of the new European Central Bank, could gradually oust London from its preeminent role. This fear is behind the pressure from many British bankers and businessmen for Britain to adopt the euro as soon as possible. If a decision were made to enter the single-currency union, Britain could be ready in as little as eight months.

Britain is faced with a dilemma. If it does not switch to the euro, it risks economic decline on the periphery of the European Union. If it belatedly adopts the euro, it will also risk economic decline on the periphery of Europe. Yes, you did read that right. Joining could be as detrimental as not joining. Pressure will be put on Euro members to harmonize rates of taxation so that no country will have an advantage over any other. (In America that is something that not even Washington, D.C., has tried to force on the 50 states.) This would mean higher taxes on British business, greatly reducing their competitive edge.

Wakeup Call for the U.S.

The New Republic was the first mainstream American magazine to warn of the dangers of the euro to both Britain and the United States.

"The pragmatic British, as ever, remain wallflowers at the continental dance. But the British see something close up that the Americans would do well to understand from afar. The reason that the French in particular are prepared to countenance such risks is that they seek to convert a united Europe into an alternative world power to the United States.

"The economic union of Europe is, in Paris's eyes, a mere prelude to political union. And the point of political union is to lessen American influence and involvement on the continent, and elsewhere, by means of an eventual attempt to construct a defense and foreign policy that may well be antagonistic to American interests. The more honest europhiles are not coy about this. Nor should they be. But neither should Americans be complacent. If Britain especially is subsumed within a common European defense policy, the United States will lose its only truly reliable European ally" (Jan. 25, emphasis added).

The push for full political union has intensified after the genuine accomplishment of economic union. Note the attitude of London's Daily Telegraph: "We should be grateful to Joschka Fischer, the German foreign minister, for pressing the cause of European federalism with an honesty that puts British ministers to shame. In an impassioned speech to the European Parliament yesterday, he warned that the European Union would suffer 'an institutional heart attack,' unless it moved rapidly to full political integration.

"The launch of the euro, he said, had set up a 'dynamic' that would inevitably sweep aside the current political arrangements of Europe. 'The introduction of the single currency is not primarily an economic but rather a sovereign and thus eminently political act,' he said, adding: 'Political union must be our lodestar from now on' " (Jan. 13, emphasis added).

Slow and Steady

In many ways Europe is a citadel, a fortress being built slowly but surely, made to last. That's why the European dream of unity has taken so long to achieve. Past attempts to unify Europe have been through force. This time it is being accomplished peacefully. It takes time as sensitivities of many countries are taken into account.

It is understandable that many U.S. citizens yawn at talk of European unity. Remembering how quickly the Continental Congress brought the original 13 colonies together, they think that if Europeans were really going to unite they would have done so long ago. This failure to understand the difference between Europe and America has led some to believe Europe will never unite.

Europeans have a long history. If it takes a few decades to unite, so be it. They have been working on it for 50 years; now they are in the final stages. The roof is finally being put on the citadel.

In the light of recent developments in Europe, it is important to note a particularly pertinent prophecy, in Revelation 17:12: "The ten horns which you saw are ten kings who have received no kingdom as yet, but they receive authority for one hour as kings with the beast."

Acceptance and implementation of the euro came slowly and systematically. Europeans have taken more than 40 years to come to this point since the European Economic Community was founded in 1957. It was the Maastricht Treaty earlier this decade that pledged member countries to form a single currency.

Many nations needed to discuss it first. Two, France and Denmark, put it to a referendum, allowing the people to decide directly. For some years each country wanting to join had to adopt economic policies that would enable it to qualify for membership in the economic union. It was a carefully orchestrated, well-planned project. One mistake and the whole thing might have collapsed.

Prophecy Waiting for Fulfillment?

Revelation 17:12 suggests the adoption of the euro could also be the means of achieving full political union. Ten nations (or small groups of nations) will decide on full political union.

From the wording of this verse and in view of the euro precedent, it appears these 10 nations may simultaneously hold elections to decide on the issue of European political union and to choose the governments that will forge them into the United States of Europe. This would mean 10 countries changing their leaders at the same time with the intent that the leaders then choose an overall federal leader.

At some point a union of nations, led by 10 leaders and a supreme leader, will transform into the aggressive beast power prophesied in the Scriptures. Perhaps this transformation will be driven by external threats that a democratic system cannot handle.

The New Republic is right. A new superpower is in the final stages of coming together. Two centuries of Anglo-Saxon domination of the globe may draw to a close. The world will never be the same.

Suggested callout #2: "The single currency cannot but help but pose a financial and economic challenge to Washington, and that eventually will take on a political weight that neither side now wishes to contemplate" (William Pfaff, The Los Angeles Times).