CITY AND SUBURBAN
The paymasters of Europe stand back and send the bills to Germany
CHRISTOPHER FILDES
It is a pleasure in these astounding times to watch the markets trying, like the rest of us, to rise to the level of events. City dealers did their limited best, marking up shares in British companies which might supply gravel to German builders (though demolishers look a better bet), Even Ger- man shares, those sleeping uglies of the bourses, have had artificial life puffed into them. German interest rates, though, are telling a different story — so that money threatens to become more expensive in Frankfurt than it is in New York. I would rather believe the interest rates and their mirror image, the foreign exchanges, where the deutschmark has been weaken- ing. I think they are telling us at whose expense the old order in Europe was maintained, and who will get the bills in future. They call to my mind the prescient arithmetic of Milton Hudson of the Mor- gan bank, whose economic analysis of detente I quoted here some months ago. Mr Hudson looked at the defence budgets of the United States, West Germany and Japan, as proportions of those countries' total output of goods and services. Put like that, if the US proportionately spent no more than West Germany, it would not have a Federal budget deficit to worry about, and if it proportionately spent no more than Japan, it would not have a deficit on the balance of payments, either. Now imagine what the comparisons would look like if they brought in Russia. That economy, whose output on a true compari- son may well be smaller than ours, has been trying to support a defence budget which is meant to keep up with the Americans (and then to leave a bit over for the Chinese). I cannot now imagine that, on either side of the Permeable Curtain, those who have been the paymasters-in- chief for so long will go on paying such bills. Conversely, when the bills start to come in for the regeneration of East Germany and Europe beyond it, the largest share of those bills will be made out for payment in deutschmarks. A new settlement in Europe will shift the econo- mic balance in others' favour before Ger- many can gain. Even our own dear balance of payments would look better if we were not spending our reserves to keep an army on German soil. That is one lesson for and from the markets, and the second is simpler. It now makes no sense to say `Europe' and mean a peninsula stretching
from the wire to the sea, not (in de Gaulle's phrase) from the Atlantic to the Urals. Its money, or its member countries' monies, must reflect its scope and diversi- ty. It is those who want a peninsula with everything tidy, including the currency, who now look the little Europeans.
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