January 5, 2005
CATCHING UP TO RUMMY:
Eastern bloc prospers as 'old Europe' falters (Carl Mortished, 1/05/05, Times of London)
YOU could have doubled your money last year, had you invested in European stocks. Not in Frankfurt or in Paris, where an index tracking fund would have yielded niggardly returns of 4 per cent and 7 per cent, respectively. In order to realise the biggest gains you needed to move your money east.The formal accession of the Eastern bloc states to the EU took place in May but the Prague and Budapest stock markets started their move before spring. Prague’s PX-50 index rose 59 per cent last year and Budapest’s Bux price index was close behind with a 57 per cent gain. Warsaw’s delightfully named WIG index was more measured, increasing by a quarter but enough to deliver a thumbs-up to the Polish strategy of courting foreign investment with low company taxes.
Such huge gains contain an element of one-time adjustment, an anticipation of accelerating growth as the accession states dip into the structural funds pot in Brussels and exploit the open door to EU markets. These superprofits are unlikely to be repeated, so the question is whether now is the time to put money back into “old Europe”.
There is little to cheer about. German unemployment increased again in December and France yesterday revealed a third quarter of nil growth last year. As if the statistics were not sour enough, Jacques Chirac, the French President, added a twist of lemon, calling for more state intervention.
Leaving us with the question: Why join Old Europe instead of Young NAFTA? Posted by Orrin Judd at January 5, 2005 9:17 AM
One would hope Bush is working to pull Britain and the New EU countries into Nafta type agreements. But can Bush do a deal with Poland alone or must he, now that Poland has joined the EU, do one with all of the EU?
Posted by: AWW at January 5, 2005 10:21 AMOur State Department encouraged EU growth since forever. But then, a job requirement of being in the State Department is a pathological hatred of America.
It is clearly in the interest of the nascent democracies of the East to join NAFTA or something similar. The nations that were stomped on by European Empires, i.e. Slovakia, Poland, Croatia Lithuania, Ukraine and Georgia and those that were permitted to languish in Ottoman torpor i.e. Romania, Moldova, Serbia, Macedonia, Bulgaria and Armenia are all natural candidates for inclusion in some Euro-American FTA.
It is probably more difficult for us to incorporate nations like Estonia and Latvia which are basically Scandanavian in orientation, or the Czech Republic, Slovenia and Hungary which see themselves as part of the European heartland than it is these others.
Posted by: Bart at January 5, 2005 10:22 AMBart: Whatever their intent, by backing the EU the State Department has in fact greatly strengthened America. (In fact, if you look at US post-war policy as an exercise in eviscerating Franch and Germany, much that is otherwise opaque becomes clear.)
Posted by: David Cohen at January 5, 2005 11:22 AMHave they been invited to join young NAFTA?
Posted by: Bret at January 5, 2005 1:47 PM