The European monetary union is proceeding as we expected. Interest-rate convergence has produced the expected decline in long-term rates in Spain; Italy and Portugal. Stock market performance in these countries has been nothing short of spectacular. Since the beginning of the year; Spain has gained 43%; Italy 42% while Portugal has increased a mere 39%. Even Euroland wannabe Greece has gained 52%. Convergence is a wonderful thing. While the gains from the currency union may be fully realized in the markets by year's end; we believe the full unification process has a long way to go. As Europe unifies its regulations to the lowest common denominator; the European bourses will rise. We see evidence this is already taking place nearly every day. The European markets are responding to market forces and are finding; and using; market solutions to solve problems. A recent example is new legislation permitting the hiring of temporary workers; which provides a simple way around labor rigidities and the inability of many companies to fire workers. European companies are also increasingly adopting U.S. reporting standards and profit-driven management styles that focus on shareholders issues.

Download Complete Report in PDF Format

Download Complete Report in Word Format