Finally, it is useful to note the extent to which all the major actors in Germany would be willing to sacrifice the deutschemark
to a truly democratic European Union.
stronger than) its central rate vis-d-vis the Deutschemark
by an unusually wide margin ([ILLUSTRATION FOR FIGURE 7 OMITTED], panel A); at the same time, both short-term market rates and policy-determined interest rates were significantly lower in the Netherlands than in Germany ([ILLUSTRATION FOR FIGURE 7 OMITTED], panel B).
The dollar has fallen to less than one-third of its 1970 value against the yen and is worth only 40 percent of its value against the deutschemark
On October 6, 1979, the Federal Reserve was compelled, by a flight from the dollar into gold, the deutschemark
and the Swiss franc, to carry out the "Saturday night massacre.
For simplicity, we will assume that EuroIndustries, like everyone else, prices its products in line with US dollar prices, but that it accepts payment in Deutschemarks
at the spot rate at the time of sale.
Given the severity of the recession, domestic wage moderation, stable or even falling world commodity prices and the appreciation of the Deutschemark
, progress towards price stability was disappointingly slow in 1993.
We have assumed that the risk premium on the French franc vis a vis the deutschemark
and the Japanese yen actually strengthened during the run-up in oil prices, and only settled back after hostilities ended and oil prices retreated.
Until the last federal elections in Germany last year, the German people were never required to vote on the proposal to replace the deutschemark
with a European currency.
The weakness of the deutschemark
results partly from the strength of the US dollar.
A more detailed assessment of performance would also have to take into account that Italy entered the eurozone with an undervalued currency, particularly against the deutschemark
, given Italy's exit from the ERM and depreciated re-entry in the mid-1990s.