Presentation at the World Trade Center of New Orleans

Introduction

First of all, I want to thank the world trade center for giving me the opportunity to speak to you about the latest developments in Europe, the ways in which France is taking part, and what it expects to see in the years to come.

- the collapse of the asian economies in the fall of 1997, and the worldwide crisis that ensued, led american investors, who had no doubt harbored a few illusions as to the solidity of the "tigers" and "dragons," to rediscover Europe, and to recall that it is still the United States' leading partner. It was this observation that led sir leon brittan, vice president of the European Commission, to quite aptly describe Europe as a "new tiger."

- and on a more positive note, one that stresses the merits of the Europeans rather than the misfortunes of others, I sincerely believe that recent developments in Europe, the emergence of a large domestic market since the mid-'80s, the extensive financial rehabilitation undertaken by all countries seeking to join the single currency zone, the opening of markets and the deregulation of a number of economic activities, did not escape american investors. Investing in Europe, or seeking European alliances and partnerships, is often good business.

I was asked to describe the prospects of Europe, from a french point of view, of course, in the wake of the birth of European Monetary Union. I will focus on three themes. First, launching the Euro certainly marks an important turning point in the building of Europe. Second, apart from the obligatory success of the single currency, European will have to face several great challenges in the coming years, such as its eastward enlargement and its increasing involvement in the military and diplomatic spheres--a subject that I find incredibly timely, at a time when nato, which just celebrated its 50th anniversary in Washington, is engaged for the first time in its history, in kosovo, in a real war. And third, I will underline in this general context, that the ties between the European union and the United States will become ever more pivotal.

1. The launching of the Euro certainly marks an important turning point in the building of Europe.

A) Indeed, since january 1 of this year, parities have been irrevocably established for 11 European currencies, including the french franc, the german mark, the italian lira, the spanish peseta and seven others. Thus, the Euro was born. All the members of the European union are participating, with four exceptions: greece, because it's not yet ready; and the united kingdom, denmark and sweden, which all preferred to wait for domestic policy reasons. In Europe, everyone hopes that these four countries will join the front runners as soon as possible.

Concretely, at this point the Euro is bank money. You can now have a bank account in Euros, do your accounting in Euros, make commercial transactions or transfer funds in Euros, and perform exchange and credit operations in Euros. The European currency will only go into regular circulation on january 1, 2002. Until then, the 11 national currencies will coexist with the Euro. In the interim, prices will be posted everywhere in both units, which admittedly will not simplify the job of everyday citizens, but will also give everyone a chance to become familiar with the new currency. The 11 national currencies will be retired from circulation no later than july 1, 2002.

B) This is indeed a revolutionary, irreversible event. The monetary unification of Europe has of course been in the works since the end of the '70s. But up until now, that was simply a coordination--an ever closer coordination, it's true--of monetary policies, with excellent results notwithstanding. In the eyes of most observers, the idea of pooling the different participating currencies into a single currency appeared either sweetly utopian or an invention of crazy technocrats, or both. As of 1990, however, and largely at the initiative of France and germany, the Europeans decided to go farther and to establish monetary unification. I want to note in passing that the most remarkable thing was no doubt for such a unification to take place in an often depressed economy, making it even more difficult to fulfill the necessary criteria for qualifying for the Euro. And herein lies the revolutionary nature of the Euro: the 11 participating countries are renouncing their privilege to mint their own currencies, one of the central attibutes of sovereignty, so that they may combine them. They are assigning the management of interest rates to an independent central bank. From now on, the monetary policy of the participating countries is in the hands of a supra-national entity, the ecb although the various finance ministers will continue to monitor it.

My compatriot yves-thibault de silguy, the European Commissioner in charge of this undertaking, recently called the Euro a "freeway without an off ramp." I believe the expression was well chosen, and nicely conveys the irreversible nature of the European endeavor. Monetary unification is indeed the final stage in the creation of a greater European market within which all transactions will take place in the same currency, without exchange costs. This will considerably simplify the lives of economic operators and ordinary citizens alike. It will foster growth and, everyone hopes, job creation. It will also facilitate the strategy of non-European investors, who will be able to maneuver within the Euro zone with much greater ease.

Of course, there's still a long way to go. The economic and monetary union is a formidable challenge. Its success, over time, will mean overcoming inevitable and predictable difficulties. To be as fruitful as possible, monetary unification will require Europeans to harmonize their tax structures, social legislation and coordinate their economic and budgetary policies to an even greater degree. But the choices have been made, and European public opinion, once skeptical, has become very commited over the months to an endeavor that nevertheless forced them to make considerable sacrifices. Everyone is so determined to see it succeed that I believe failure is unimaginable. Indeed, the governments of the participating countries firmly intend to bring their economic policies closer together. And the markets, which are after all the sole arbiter in these matters, weren't wrong. They were geared up for the advent of the Euro and thus far have given it a very warm welcome.

C) to conclude with this point, this is clearly a major step in building Europe. It is obviously premature to speculate on the place the Euro will hold as far as relations between the major monetary zones are concerned. The dollar remains by far the leading currency. While the american economy represents 25 percent of the world's gdp, the dollar corresponds to 61 percent of monetary reserves, and nearly 40 percent of all commercial exchanges are in dollars. This supremacy will likely remain in the months and years to come, given that it will take time for the Euro to adjust and come into widespread use. On the other hand, I wouldn't rule out the possibility that the European currency could gradually gain greater influence, to the detriment of other major currencies. Some observers thought they could detect a sign of weakness in the fact that since january 1, the Euro has depreciated somewhat against the dollar (1.06 Euros/$1 against 1.19/$1 four months ago). In my opinion, however, that's good news. Indeed, in France, many observers worried that if the Euro rose too high it would handicap our exports. Its recent slip had the opposite effect, and that's something to be pleased about.

Politically speaking, the renunciation of monetary sovereignty marks a crucial step in the process of European integration. To those who point out that political unity is trailing economic unity, I would point out only that this was precisely the choice made 40 years ago by Europe's founding fathers: first to create concrete areas of solidarity (steel, the atom, agriculture) that would make Europe useful and necessary, and then to build on those areas of solidarity to bring people together. The creation of the Euro fits in perfectly with that approach. It does not exempt us from seeking greater political integration, but on the contrary, will make it easier. I would even go farther and say that economic and monetary unification should hasten Europe's political unification.

II. Apart from the expected success of the single currency, Europe will have to face other great challenges in the years to come.

A) The first is its enlargement. Just as Europe is achieving greater solidarity through the creation of a single currency, it is about to become much bigger. The trend toward enlargement is an old one--already in 1957, the European union went from 6 to 15 members. The next enlargement, however, will be of a completely different nature, for it essentially entails integrating the formerly communist countries of central and eastern Europe, the baltics and cyprus. Negotiations have already begun with six of them (Poland, the Czech Republic, Hungary, Estonia, Slovenia and Cyprus). All of these candidacies are certainly a shining symbol of the European union's attractions and the benefits it is supposed to provide. Nonetheless, they pose two sets of problems that the Europeans must resolve before the next adhesions, which are not scheduled to take place for several more years.

First of all, the methods of financing the European union had to be reformed, along with the major common policies (agriculture; solidarity between rich and poor regions, etc.). The European council in berlin this past march 24 and 25 succeeded, after long and difficult negotiations, in defining the financial framework of enlargement.

The other reform that must be carried out--and no doubt it is an even more delicate one--involves the European union's institutions. The institutional structure and current decision-making procedures remain the ones designed for a Europe of six members. They are already awkward with 15 members, and could break down completely with 20 or more. They must therefore be reformed, France, for its part, hopes to see the institutions made more efficient (by reducing the format of the college of Commissioners) and democratic (giving more weight to demographic criteria in decision-making procedures to ensure that a majority of Europeans wouldn't be forced to go along with decisions they would have opposed). I have to insist on this last point: the process of European integration represents the partial but successive and cumulative abandonment of sovereignty. The creation of the Euro, which can be compared to the renunciation of the old royal privilege of minting currency, is the best illustration of this. That is why, as president chirac emphasized on march 2 in his speech to the national assembly in paris, the European integration movement must obligatorily be accompanied by the strengthening of different mechanisms of democratic control. Otherwise the European project would lose all its legitimacy and its popular basis. From this perspective, the European Commission's recent resignation provides an excellent example of the sorts of errors that had been committed. The European parliament, backed by public opinion, had threatened to dismiss the Commission. It preferred to move first. Clearly, this represents a democratic advance for the European union, which was often criticized for being overly technocratic. Recent events have indeed attested to the emergence of a real force for parliamentary control, which is unquestionably a step in the right direction.

B) Europe's second challenge pertains to its role in security and defense. This is often perceived with skepticism, sometimes irony, on this side of the atlantic. The yugoslav example is often cited in this regard--somewhat wrongly, in my opinion, when you know the extent to which the dayton accords, decisive as they are, derived from European ideas. Kosovo further demonstrates just how much this feeling is misplaced: Europeans can act when it is necessary, and take their fair share of the burden with the United States, sharing the same goals. The impressive dispaly of unity in purpose and resolve by the allies at the Washington nato summit, should dispel for good the expressions of skepticism and ill-will towards European ambitions.

Asserting a growing role for Europe shouldn't be perceived as weakening the United States or the atlantic alliance. It now has a greater chance than ever to come into being. The Washington summit has recognized the full extent of the positive contribution that European defense identity can bring to the transatlantic partnership. This follows the impetus given last november by the british prime minister, in his speech on European defense at the European council of pörtschach. Subsequently, the french-british declaration of saint-malo laid the foundations for a renewed European debate on defense. What was said in saint-malo? Simply that Europeans should have the ability, if need be, to autonomously organize an operation in which their interests were at stake, in the event that the United States is not involved. In order to do that, our military capabilities will have to be optimized and streamlined, and Europe will also need to develop its own decision-making mechanisms to become involved more effectively in crisis management. We're not talking about competition here, in which the European union or nato would vie for the privilege of dealing with a crisis requiring military means, but of a win-win approach, in which the assertion of European responsabilities will benefit the United States. I'll spare you a detailed description of the institutional consequences of this new approach, which in fact haven't yet been completely ironed out. Just keep in mind that logically, the European union would be the locus in which the European will to act would be expressed and carried out. Still, complex institutional issues have yet to be adressed. The success of this endeavour will benefit the transatlantic partnership as well as the European integration process.

III. In this general context, ties between the European union and the United States will become ever more pivotal.

A) Indeed, they are an essential element of stability and prosperity. The United States remains Europe's leading partner, and vice versa, in every area, and not just trade. Our "values," our concepts of democracy and the organization of international society, while they might not always be perfectly identical, are nonetheless exceedingly close. We must therefore work together in all sectors.

B) Unfortunately, however, transatlantic relations are clouded by too many disputes (bananas, hormone beef, hush-kits ...). Having different interests is legitimate, and sometimes even healthy and stimulating. Differences are part of life. Europe and the United States can be and in fact often are competitors. That's fine. But competition shouldn't be unfair. It should be organized. In the area of trade, the wto is there to settle disputes. It sets the rules of the game and reaches decisions based on those rules.

That is why the European union cannot accept the unilateral practices that the United States engages in all too often. Whether they are carried out by the administration, congress, or the administration under congressional pressure makes no difference from my perspective. Extraterritorial sanctions such as ilsa or helms-burton are not acceptable. Also unacceptable are the unilateral applications of section 301 of the 1974 trade act. American law must apply to american citizens and corporations only, not to foreigners. The United States congress is not entitled to establish by decree the rules of international law. The wto has established procedures. They must be scrupulously followed and applied. If Europe and the United States do not set an example, the structure of international trade relations will necessary suffer. On the other hand, if we can agree, everybody will benefit.

C) Happily, the picture is not solely one of conflict. At the last transatlantic summit, a new Transatlantic Economic Partnership (TEP) was launched that will further strengthen trade relations between the United States and Europe. We are working together to avoid new conflicts in the areas of new information technologies, health and phytosanitary regulations.

- Europe and the United States are and will remain two major partners. I want to return to what I said in my introduction: Europe exists, is still there and is still growing, and it will be a long time before it is no longer america's leading partner. The war in kosovo, which is a "just" war, as president chirac said at the nato summit, has just offered a dramatic demonstration of the irreplaceable nature of the transatlantic partnership. There too, together with nato, the European union and the United States must pursue their action on behalf of human rights and to eradicate barbarity in Europe.

- new trade disputes will arise. This will be all the more inevitable as the European union moves ahead on the path to integration. In no case should we dramatize them. We are and will remain among people of good company. International rules exist to resolve future conflicts. Politically, the united nations charter and the security council decisions must, from our perspective, remain the obligatory bodies of references. In trade, it is up to the wto to set the rules.

- to end on an optimistic note, I want to remind you how much we learned from the lessons of 1998, lessons that everything indicates will be borne out in 1999. In a world that is going through a real and severe economic and financial crisis, Europe and the United States remain a true zone of peace and stability. Those were the objectives of the founders of Europe, objectives they shared with their american liberators in the days after the second world war. Let us not lose sight of that, especially in the present context in the balkans, let us together preserve this precious common heritage and help spread it elsewhere in the world.