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. Last Updated: 07/27/2016

atlantic rim: Europe Keeps Asian Worries In Background




At a rare opportunity to question Germany's Helmut Kohl, France's Jacques Chirac, Britain's Tony Blair, and the European Union president Jacques Santer, your columnist asked each of them the same question.


As they gathered in Luxembourg for the jobs summit, had they discussed -- even informally -- the possible spread of effect from the threatened financial meltdown in Asia? Were they concerned that it might affect Europe's economic prospects, just as they take the great gamble of starting the new single currency? Might it affect their planned strategy to get Europe's unemployed back to work?


Nein, Non, No and, again, No. Some added that this was a matter for finance ministers; others objected to such an extraneous question being raised when they wanted to discuss ways to create jobs in a Europe with 18 million unemployed.


Before leaping to the depressing conclusion that Europe's leaders are behaving like ostriches with their heads buried in the sand as the global economy totters, give them some credit. They had all authorized one sensible act, even if they did not much want to talk about it. Their finance ministers had written a collective letter to the International Monetary Fund declaring their readiness to join a second wave of rescue finance for South Korea if the IMF's own resources were too stretched.


But the economy of South Korea, albeit the world's 11th largest, is worth only dollars 400 billion a year in gross domestic product. The economy of Japan, where the shock waves have now landed with the bankruptcy of the Yamaichi investment house, is six times larger.


And the fear is not that Japan might turn to the IMF. As the world's largest creditor, it has more than enough investments abroad to finance its own bailout. The problem would be if Japan's banks began to sell them. The last thing the West's jittery markets need is a wave of Japanese selling.


The Europeans argue with some complacency that their total trade with Asia amounts to only 2 per cent of their joint GDP. True; but it also amounts to 30 percent of the trade Europeans do with the world outside their common market. And with Europe's internal demand flat, the economic recovery so far has been led by increasing exports.


"Everybody is worried about the Asian crisis, but people like Kohl and Blair are not going to say so publicly because a statement that Europe is concerned could make matters worse," one senior EU official told me, citing the letter to the IMF as proof EU leaders were active behind the scenes.


The management of the global economy is starting to resemble that of the 19th-century Concert of Europe, when Europe's foreign ministries conducted their diplomatic minuets in private, drawing up secret treaties and alliances, rather than conduct their relations openly before their national media and public. At the end of World War I, U.S. President Woodrow Wilson blamed Europe's "secret diplomacy" as a cause of the war.


No doubt 19th-century imperial diplomacy and late 20th-century global finance are different. No doubt another U.S. president, Bill Clinton, has been up to his neck in open economic diplomacy at this week's Asia-Pacific economic summit. But the Europeans collectively run an economy of the same dollars 7 trillion scale as the United States, and so far, the Europeans are not pulling their weight.