At first glance, the scheme unveiled at a press conference on Thursday in Brussels looks like the laying of the foundations for a powerhouse in the world marketplace. Even with Britain still hesitant to trade its pound for the euro, wiring the stock exchanges in London, Frankfurt, Amsterdam, Brussels, Madrid, Milan, Paris and Zurich would seem at the very least a symbolic step in the ongoing march toward the unification of Europe's national economies.
But symbolism it is, as a second glance reveals. What Werner Seifert, chairman of the Deutsche Börse AG, was announcing is an electronic interface, quite literally a "virtual exchange", as he calls it. "Today a dealer who wants to trade European blue chips across the borders has to connect eight times to eight different exchanges. All that will be in the past. He'll soon have one electronic plug, he'll log in, and he'll have a virtual blue chip market in front of him."
Fine, but check under the hood. The interface won't even be running the same system. Frankfurt's DAX runs on the German trading system called Xetra while SETS powers the London Stock Exchange. The program that is to make these systems compatible has yet to be written.
Even when it is and it's up and running, this "market of markets" will handle only blue chip stocks, anywhere between 300 and 600 of them, and these will be of little interest to either private online traders or to those dabbling in regional markets via exchanges in such cities as Berlin, Munich or Stuttgart. And with the markets receiving more and more attention in the press throughout Europe (once the German version of the "Financial Times" and a new business title from the newsweekly "Focus" debut, there will be over a dozen financial papers and magazines competing on German newsstands alone), this is not an inconsiderable contingent.
As Stephan Kaufmann writes in the "Berliner Zeitung", the regional exchanges are hardly quivering in their boots at the prospect of the Europe-wide network. "We take care of the small trader," he quotes Bernd Weber, spokesperson for the Stuttgarter Börse, as saying: "When private traders deal with professionals, the results are rarely good for the private trader."
Further, Kaufmann notes that after 15 months of discussion, all London and Frankfurt were able to announce just a few days ago was an agreement on opening times. Paris, however, refused to go along, insisting on closing in time for the French newspapers to run final closing values.
Now, Seifert offers this indefinite prediction: "I think we won't wait long before we stretch trading times so that we'll be overlapping with American trading times." Kaufmann's take, all things considered: "With the bundling of liquidity, Europe is to be made more attractive, particular for major traders, and to compete with Wall Street. That goal is still a long way away."
Of more immediate concern to German investors is the shaky DAX which got off to a rotten start on Friday, down nearly two percent by the afternoon and below the 5200 mark. That's about in line with the performances of the Nikkei and Dow Jones Indexes on Thursday, though.
Some read the real warning signs in the steady tumble of the "Neue Markt", often referred to as Germany's Nasdaq since it's loaded with high tech startups, new media outfits and so on. By Thursday, the "Neue Markt", which debuted in March 1997, had skidded to just over 2800 points, a 30 percent fall from its high at the beginning of the year. SPIEGEL ONLINE's Thomas Kaufner points to rumors of dubious business practices and way too high hopes based on too little knowledge of the marketplace among traders as reasons for the dwindling faith in the index.
Germany and Europe on the Web today:
Edmund L. Andrews provides the background on the "market of markets" in the "New York Times": "The pressure is acute on two fronts. Independent electronic trading networks pose an increasingly serious challenge to traditional exchanges here, just as they do in the United States. But on top of that, investors want to reap the benefits of Europe's currency union." Free registration required
The "Economist" warns: "Europe still lacks many of the ingredients that have made American high-tech industry so successful. The 'ecology' of specialist backers, entrepreneurs, lawyers and analysts is barely developed. Its capital markets are illiquid, its product markets fragmented - and its citizens afraid to take risks."
Nevertheless, Tony Barber reports in the "Financial Times" that hopes are high for the French and German economies. Also in the "FT": Bertelsmann is betting on the Internet. Kevin Done notes that the head of the third largest media company in the world, Thomas Middelhoff, is far more concerned about new startups than CBS-Viacom-type mega-mergers, which he calls "dinosaurs". And Mannesmann splits in two, sparking a second report from Ralph Atkins and an "FT" editorial praising the move. Free registration required
Mary Lisbeth D'Amico reports in the "Industry Standard": "If the German government has its way, at least 40 per cent of Germany's population will have easy access to the Internet by 2005."
Follow the ups and downs of the Net industry in Europe at Europemedia and European WebSoup. Both offer email newsletters. Also, Budapest-based Steven Carlson moderates the excellent discussion list Online Europe.
Back to the "FT" for Haig Simonian's fine report on the high spirits within the Party for Democratic Socialism. Free registration required (See also Monday's "Digest ")
On Wednesday, Israeli Prime Minister Ehud Barak visited the concentration camp in Sachsenhausen accompanied by Chancellor Schröder as well as three survivors and their families. Deborah Sontag quotes survivor Eli Carmel, 82, in the "New York Times": "One day I was beaten unconscious and I fell in the snow. I was taken with the other stiffs back to the barracks and we were stacked up, all the corpses. But I woke up in the night, and I crawled out. How come I am here when so many were killed? There is no explanation." Free registration required
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