Euro turns investment spotlight on Europe

Date: 24/04/1997

THE arrival of a single currency could signal a massive shift of investment funds away from the US markets into Europe.

With this wake-up call, Yves-Thibault de Silguy and European Monetary Institute President Alexandre Lamfalussy will attempt to shake American investors out of their apathy towards the euro.

A conference in New York City on 30 April aims to bring together 200 corporate treasurers, directors of company investment strategies and bankers to hear the views of the EU's money men.

Until now, Americans have shown little interest in the arrival of economic and monetary union from January 1999, so much so that one recent conference organised by the London International Financial Futures Exchange (LIFFE) was cancelled.

De Silguy hopes to bring an end to this. “We have been saying since the beginning of the year that the focus now will shift outwards and more thought will have to go into the external impact of the euro,” said his spokesman.

The Commissioner's staff this week published a report on the 'international aspects of the euro', investigating whether central banks throughout the world will start to use the euro heavily as part of their reserves - and so erode the pre-eminence of the dollar as a reserve currency - as well as the reductions in transaction costs for companies.

De Silguy's chief of staff, Xavier Larnaudie-Eiffel, recently briefed members of the International Monetary Fund in Washington at a special EMU seminar on how the advent of a pan-European capital market would hit the dollar.

A stark warning came at the same seminar from US economist Fred Bergsten, who warned that professional investors - pension and insurance funds and company treasuries - could move as much as 900 billion ecu into the euro.

With these massive portfolio shifts, De Silguy is convinced that the Americans will be forced to the G7 negotiating table to strike deals limiting the volatility of the dollar. It is apt that the conference where he will deliver his speech will take place at New York's Plaza Hotel, where in 1985 world leaders agreed to push down the dollar's external value.