No time for lectures about governance

SCHADENFREUDE is the order of the day in continental Europe. After years of being lectured by the Americans about accounting standards and shareholder value, the Continentals can barely disguise their glee as yet more US corporate shenanigans are exposed.

Add in the fact that the euro is rising towards parity with the dollar and many Europeans are boasting that their form of untransparent, non-shareholder-friendly capitalism is superior after all.

Not so fast. The Continentals have their own fair share of fraud, greed and financial disaster. The Germans have the skulduggery of Mobilcom, the bankruptcy of Kirch and the folly of Deutsche Telekom. The Italians have Fiat's distress and the insider-trading convictions for top financiers such as former Telecom Italia director Emilio Gnutti. And that's even without mentioning the regular cheating of minority shareholders.

As for the French, Vivendi and France Telecom have become bywords for empire-building and value destruction. Yet no heads have rolled. At least in the US the guillotine operates swiftly.

Well, what about Britain then? Has it avoided the untrammelled greed and accounting trickery of the US, while also sidestepping continental Europe's brand of corruption? The Brits shouldn't gloat either.

There's been no accounting fraud on the scale of WorldCom. And nothing as shocking as the billions of dollars in off-balance-sheet loans US cable group Adelphia granted its founder John J Rigas. But Marconi, NTL and British Telecom are nothing to be proud of either.

This is not a time for lecturing, but for humility. The downturn has exposed weaknesses in all forms of corporate governance. All countries need to improve themselves.

Everyone loses if dollar decline becomes rout

FIRST comes euro parity to the dollar. But then what? History suggests a simple outcome: overshoot. A 20% drop in the dollar-euro exchange rate eliminates the overvaluation that several studies suggest still exists. Then comes another 20% on top of that.

This is not as outlandish as it might sound. The euro started life at 1.17 to the dollar, and many believed it undervalued then. Further back, the synthetic euro traded as high as 1.34 in 1995. The only real question is what will stop the dollar falling back there again.

Central banks are already trying to slow its decline, at least against the yen. But such support cannot stop a secular trend - and, indeed, the consensus is that this is a new trend. Usually it pays to be suspicious of a consensus. But probably not this time.

It does not require active dollar selling for the currency to weaken, merely that foreigners stop buying. The US requires $10bn of fresh foreign financing a week to cover its current account deficit. And foreign investors are full up with dollars. Even without accounting scandals, they don't want any more.

The US government has shown little stomach to try to stop the dollar falling. After all, it loosens monetary policy and so boosts growth. What is surprising is that President Bush's government has not come out more strongly against the strong dollar policy it inherited from the previous administration.

The reason for this? Fears, perhaps, that the dollar's decline will turn into a rout. This would help no one -especially not Europe where rapid euro appreciation would kill off what little growth the Continent's struggling major economies have left.

Time to laugh

SOMETIMES things get so bad that there's nothing left to do but laugh. So it is with WorldCom's astonishing $3.8bn (£2.5bn) accounting fraud.

One of the best jokes to have surfaced in the wake of last week's events goes as follows:

What's ebitda? Earnings before I tricked the dumb auditor. And ebit? Earnings before irregularities and tampering.

And who's the CEO? Well he's the chief embezzlement officer. And the CFO? The corporate fraud officer, of course.

What about NAV? That's the normal Andersen valuation. And eps? The eventual prison sentence.

If nothing else good comes out of the post-Enron, post-Tyco, post-WorldCom crises, at least the financial markets are displaying a morbid sense of humour.