European Economic & Monetary Union: Speculatorswait in Wings to Put Currency to Test
Given what happened to the rouble, is the euro also going to fall prey to speculators?
European politicians have been remarkably bullish in recent months about the single currency's chances of withstanding any onslaught from speculators.
Outgoing German finance minister Theo Waigel said currency speculators would get nothing more than a bloody nose if they tried to unpick the euro conversion rates that were set earlier this year.
"Everyone who speculates against it will get a bloody nose.
"Every speculator will experience just one thing - enormous losses," he said, in a forceful rebuff to suggestions that the run-up to monetary union would be plagued by speculators.
His remarks are hardly surprising when one considers how much is riding on the successful launch of the single European currency. Governments across Europe have made EMU a political priority.
But do Herr Waigel's remarks, and more strident claims by other politicians across the continent ignore recent European banking history?
Most currencies have experienced a degree of speculative attention at some time.
Leading economists say that as the euro becomes the currency of choice in 11 countries it will be used for so vast a number of transactions that the chances of a single one or group of speculators coming along to manipulate it are slim.
Billionaire financier George Soros might be able to influence the way the market sees the rouble, a currency in a comparatively weak area, but he is less likely to have such power when it comes to a currency used across 11 major industrialised nations.
Group economist at Charterhouse Tilney Securities, Richard Jeffrey, believes the currency could turn out to be stronger than many think.
"It is an enormous economic experiment, into which we are putting lots of chemicals which could interact in a number of different ways.
"There is no forecaster who can say with any degree of confidence how the euro is going to behave, which is why it is such an alarming proposition."
Admittedly, the euro is just another currency and, like any currency, it will be vulnerable to some extent, but a large economic area such as the European Union and a central bank that is widely expected to be strongly disciplined, this vulnerability is expected to prove distinctly limited.
Russia became merely the latest in a long line of victims this summer, with President Boris Yeltsin and his youthful team of economic advisers bowing to the inevitable in late August and agreeing to an effective devaluation in the currency of some 40 p er cent.
Critics of monetary union have latched on to President Yeltsin's difficulties as an indication of what the European Central Bank can expect when the euro is officially launched in January next year. …