Outside the Box

Economic Reforms Sacrificed For Political Gains

John Mauldin

April 18, 2005

This week we will turn once again to a group headquartered in Hong Kong with offices in Stockholm and New York called GaveKal Research Limited. Louis- Vincent Gave's GaveKal Ad Hoc Comments for Friday, April 8, 2005 looks at the political and economic climate in Europe and what that might mean for the Euro and European government bonds.

The European Union, now with a few years behind it, is looking to make some changes and as we have seen throughout history, what is good politically is not always good economically. Gave looks at the current issues and why this is bearish for Europe. The problem is not the concept of the EU but the implementation when politicians get involved and that is why this became our latest Outside the Box.

It is one of the reasons I wrote last week that I am somewhat nervous about the euro in the short term and prefer to play my overall bearishness on the dollar with Asian currencies. (Go to www.investorsinsight.com for last week's letter.)

John Mauldin, Editor
Outside the Box

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Economic Reforms Sacrificed For Political Gains

By Louis-Vincent Gave, April 8, 2005

When told of the 1938 Munich accords that allowed Hitler a free rein into Czechoslovakia, Churchill said: "they sacrificed honour for peace, and they shall have neither".

Witnessing recent events in Brussels, Churchill's statement comes to mind. Two weeks ago, European leaders tore away the Stability and Growth Pact (SGP) and dismantled any hopes of liberalization of European services (the Bolkestein reforms)…

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