Dollar vs euro

The year 2012 will decide whether the euro survives stronger than ever, or perishes, sucking Europe down into catastrophe. In the first four months the euro zone will need loans of 444 billion euros, rising to exceed 2 trillion euros by year's end. The biggest debtor is Italy at 386 billion euros - a huge sum, which, however, its strong economy can pay, say the experts. The fears come more from the extreme fragility of the Italian political system, where there is no party in sight capable of imposing the necessary sacrifices. The fate of Europe now depends on Italy.

Next comes France with 378 billion euros of debt, dangerously near to recession, with rising unemployment. Then Germany at 257 billion euros: in spite of sinking exports and internal consumption, it shows a somewhat enviable macroeconomic stability. Fourth comes Spain with a debt of 175 billion euros.

The total sum of debt does not tell us much, since its weight depends on the size of each economy's gross domestic product (GDP) and capacity for growth - differences which explain why Germany is paying two percent interest on its debt, and Spain five.

If the right policy on saving is observed, that is, one which in the medium term does not freeze growth, the chances of climbing out of the hole are good. Obama's warning that to avoid a catastrophic world crisis the euro zone will have to solve its debt problem as soon as possible has been received with some understandable indignation in Europe, coming as it does from a country whose public debt amounts to almost 10 percent of annual US GDP, exceeding the European level by 15 percent.

In spite of decrepit infrastructures, rock-bottom public services and a deficient social policy, many Americans are still demanding a lower-profile state, and above all, lower taxes.

Why is it, then, that the markets are hounding Europe, while tolerating that the US, even more heavily indebted, goes on living on foreign loans? The fact that the ratings agencies are all American must count for something, but the decisive factor is certainly the dollar's role as a reserve currency. A sharp fall in the dollar would bring down not only the countries - China, Japan - that have much of their reserves in this currency; it would also collapse the international trade that goes on in dollars, and not only oil transactions.

The role the dollar plays in the world economy enables the United States to go on getting deeper in debt. A controlled inflation - they decide the amount of dollars in circulation - moderates the debt, with a gradual descent in the dollar's value.

The economic priority for the US is to maintain the dollar as a reserve currency: something that in the medium term casts a shadow on the euro. Since the euro's beginnings, American economists have been saying that a common currency could never work in a set of countries with such disparate levels of productivity.

Yet the euro not only seemed to work, bringing the euro zone half a decade of stability and growth; it kept rising in value against the dollar, while reserves held in euros kept growing. In these years, Europeans have enlarged their economic presence in the US, which is in constant search of foreign investment to keep going.

The world crisis, which began in the United States, makes it possible that the tables may turn. Were the euro to disappear, not only would this eliminate the principal rival to the dollar; it would also enable the possessors of this currency to buy up Europe at bargain-basement prices.

This is a rumor that has arisen, not among the European left (too tired now to sing the old anti-American song), but among European businessmen who, for the moment, are busy laying in stores of dollars to hedge their bets.