The InternationaList: June 8, 2008 issue

The political calculus is easy to understand: with national elections in September, neither party wants to be blamed for job losses and the dilution of benefits. But these populist tactics will be of little help in the current crisis. The recession hasn't substantially worsened the situation of poor and low-skilled workers, the group most likely to be helped by better social benefits. Instead, the victims have been the successful globalizers—hypercompetitive German export companies that are struggling with the global collapse in demand. In recent years, German exporters contributed nearly 50 percent of GDP; now their employees, namely engineering and technical professionals, are losing their jobs at a rate seven times faster than the nation as a whole. Yet the various campaign proposals are passing them by. If Germany's politicians worsen the slump by resorting to a playbook from the 1970s, they may lose their jobs as well.

To hear some tell it, China is trying to undermine the dollar's status as the world's core currency. In March, the country's central-bank governor, Zhou Xiaochuan, proposed creating a new "super-sovereign" currency, untethered to any single nation, for use in cross-border trade and financial transactions. That role has long been played by the greenback, but economist Nouriel Roubini recently warned that an Asian century "dominated by a rising China and its currency" could soon be at hand, in part because China has been negotiating bilateral currency swaps with countries like Argentina and Malaysia, enabling them to trade using their own money.

But don't count the dollar out yet. It remains popular thanks to both inertia and the powerful attraction of the American market—U.S. GDP is still twice the size of China's, and U.S. consumers are 14 times richer. Besides, Beijing's recent challenges are more modest than analysts have made them out to be. Its bilateral currency deals have attracted a lot of attention, but they only amount to some $95 billion in a globalized economy that saw $19.5 trillion traded across borders last year. And the status quo suits even many Chinese just fine: a strong dollar means exporters there make more money.

Europe's Fringe-Worthy Election
By Christopher Werth
Europeans seem indifferent to who runs their continent. According to polls, just 34 percent of citizens plan to vote in this month's EU parliamentary election, which determines who represents their countries in the pan-European legislature situated in Brussels. That's down from the previous record low of 45 percent in 2004. The weak turnout is expected to benefit fringe parties, since extremists are the ones most likely to show up to vote. In Britain, that means parties thoroughly hostile to Europe may be headed for Belgium. The British National Party is blitzing the U.K. with ads blaming the miserable economy on immigrants from new EU member states like Poland. Meanwhile, nearly 30 percent of Brits who go online to find election information gravitate to the site for the UK Independence Party, which advocates outright withdrawal from the EU. Projections show only marginal gains for radical parties—of the European Parliament's 736 seats, extremist groups are predicted to pick up 3, bringing their total to 44—but the unprecedented low turnout could drive their numbers higher, say analysts. That's a stark contrast to recent national elections, which have seen high turnout and strong gains for mainstream conservative parties. This suggests that while Europeans may be willing to gamble with their EU vote, they're playing it safe on pressing issues at home. All politics is local, indeed.

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