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The euro's promise of riches

By the time you read this, the most important development in global finance in 50 years will have taken place. At vast expense to private sector banks and non-financial institutions - who have borne almost the entire burden of a task made unnecessarily difficult by the long-evident inability of Europe's governments to act pragnatically or in concert - the euro has been created. Sceptics are still concerned that the costs will far outweigh the benefits. But the apparent altruism of the private sector should tell them something.

The private sector has taken on this mammoth project with only muted mutterings of complaint about the costs, the effort and the risks because it expects to make a great deal of money out of the euro. In no sector is this more true than in banking especially in fixed income and equities, where volumes and values should increase enormously.

In the short run, this looks true. American investors have got used to looking for performance abroad. Asia and Latin America, two previous favourites, no longer look safe. Europe at least offers some growth and, supposedly, German-style fiscal rectitude. Substantial capital may also flow into the euro from foreign investors that never bothered with the smaller national currency markets.

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