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Despite decline, European Union remains valuable ally


So there is hope after all for the battered U.S. dollar. That's good news for Americans traveling to Europe or buying foreign goods because their money should go a bit further.

Economic and political disarray has dropped the once-mighty euro to nine-month lows against the greenback. Much-ballyhooed European unity isn't all it was cracked up to be.

You can thank the postponement by the United Kingdom of its vote on the proposed European Union constitution. Thank the "no" votes in France and the Netherlands, too. Now on hold, that measure must be ratified by all 25 member nations to go into effect. Little chance of that happening now.

Fearful workers

Part of the beef against the EU constitution is worker unhappiness in some European countries about becoming more market-oriented, a trend the constitution would encourage. Workers fear this translates into losses in jobs, salary and benefits.

The dollar previously was hurt by issues such as terrorism potential, the Iraq war, corporate scandal, rising interest rates, and the U.S. budget and trade deficits. It now turns out Europe, with high unemployment, struggling economies and differences on how to deal with them, has problems of its own.

A further blow to European pride is the likelihood that Chicago-based Boeing Co. will regain its position this year as the world's No. 1 airplane manufacturer in orders after four years of finishing behind France-based Airbus SAS.

Hot new plane

Boeing is enjoying impressive orders for its all-new 787 jetliner, which promises lower operating costs. Although the overall U.S. trade deficit widened to $56.96 billion in April, strong demand from foreign airlines for Boeing jets helped the nation's overseas capital-goods sales increase by $1.59 billion.

Economic ally

Investors shouldn't be overly gleeful about European woes. Despite the ebb and flow of U.S. differences with Europe on competitive issues, it remains an important economic ally.

A more worrisome unresolved international financial problem is the fact the U.S. trade deficit with China is running at a $162 billion annual clip, the largest deficit we've ever had with any country. As that trend accelerates, it sets the stage for a fierce battle in Washington.

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