Money Matters

The US government has a tense relationship with France. So it's been, going back to the XYZ Affair and the undeclared war of 1799. Troubles in the Middle East have fueled the flames a bit, with a war of words settling down lately into a cozy simmer. But international affairs are about more than mere words.

Thierry Breton, the French finance minister, is growing uneasy. There's an election coming up, and the voting public is going to look at the state of the French economy before they cast their ballots. The problem these days is that the French economy is dependent on...the almighty dollar.

The euro is trading at a high rate, not its record, but close enough to make Monsieur Breton very nervous. Interest rates in the European Union are heading up at a faster rate than the American rate, which only makes the euro that much less appealing to investors. The exchange rate itself makes European exports less appealing to buyers as compared to American goods.

Ernest-Antoine Seilliere, the president of a European employers' organization, is asking the finance ministers to be a bit more proactive. With European goods more expensive than their American equivalents, the average customer will go for the lower price every time. That means French factories see a slowdown in demand, and the next thing you know, they're laying off the work force. Not a pretty picture when you're the politician in office hoping to be re-elected. M. Seilliere is hoping that the predicted rise in the interest rate might be postponed, but it looks like the ministers are going ahead anyway. Should the dollar fall further against the euro, he'll be up in arms, demanding that the ministers do something to control the financial market and cheapen down the ballooning euro.

Every now and then you might hear some financial wizard make a comment about the value of the dollar versus the euro, in a voice that indicates concern over the weaker U.S. currency. Listen carefully, and you will not hear a peep out of the Federal Reserve Bank or the major corporations. It's better for American companies, that weak dollar, and it's a boon for exports. Because foreign goods, like French wines and perfumes, become more expensive at a higher exchange rate, we buy less of them, and purchase our home-grown items.

That's diplomacy in action. A gentleman's game, all so very polite, but every fluctuation of the euro against the dollar is like twisting the knife, inflicting a touch of financial pain to the cheese eating surrender monkeys.