Yes, says Martin Feldstein, Professor of Economics at Harvard University and president of the National Bureau of Economic Research. In an article entitled "EMU and International Conflict," published in the November 1997 issue of Foreign Affairs, he states that far from being only a European concern, the new monetary unit may well contribute to international economic instability as well as political turmoil and conflict.

Feldstein believes that the transition to the Euro may well bring about two unexpected results: an increasingly contentious and perhaps only short-lived union among European participants, and conflict between Europe and other countries, including the United States. He presents the following scenario: Existing disagreements on goals and methods of monetary policy among European Monetary Union (EMU) participants would be aggravated when normal business cycles raise unemployment in any given country (Europe has a notoriously high and tenacious unemployment rate). This would cause a rise in inter-European distrust, which would be compounded by unrealized expectations about power sharing, as well as both domestic and international policies.

Particularly important to watch are the relations between France and Germany: "What is clear" writes Feldstein, "is that French aspirations for equality [with Germany], and a German expectation of hegemony are not consistent. Both visions drive their countrymen to support the pursuit of EMU, and both would lead to disagreement and conflicts when they could not be fulfilled." As to the smaller EMU countries, Feldstein maintains they will become frustrated by the increasing dominance of the heavyweights in deciding not only foreign but also domestic policy for the European Union (EU).

"There is no doubt that a Europe of nearly 300 million people with an economy approximately equal in size to that of the United States could create a formidable military force,", writes Feldstein. He then asks some chilling questions: "Might a stronger Russia at some time in the future try to regain control over the currently independent Ukraine? Would a stronger, unified EU seek to discourage such action by force? Could that lead to war between Russia and the EU? How would a strong and unified Europe relate to other nations in the vicinity, including those in North Africa and the Middle East, and the Muslim states of the former Soviet Union, which are important or potential sources of energy for Western Europe?"

As to the United States, it would no longer be able to count on Europe as an ally in its relations with other countries: "The Europeans, guided by a combination of economic self-interest, historical traditions, and national pride, may seek alliances and pursue policies that are contrary to the interests of the United States." Feldstein does not speculate on how adversarial these particular relations could become, but concludes on a note of uncertainty and potential menace: "If EMU occurs and leads to such a political union in Europe, the world will be a very different and not necessarily safer place." GN