The self-satisfied conclusion of the European Council in Brussels this week, with its welcome for a resolution of the local spat about the new Commission, polite wording about more efforts on the Lisbon strategy, and a scattering of pious expressions of hope for overcoming other obstacles to the future of the EU, risks being overshadowed by a challenge from another quarter altogether.

The re-election of George W Bush for another four-year term as President of the United States has the potential to undo one of the major planks of EU construction.

This is not a matter of politics. It is crude economics. The dollar immediately took another sharp fall.

The US budget deficit, already high, is a widely-shared concern. And a second-term US President may well feel unconstrained in his budgetary policy over the next four years.

The hopes of early 2004 that the dollar might recover after the election already seem vain. And circumstances are conspiring to drive the dollar lower.

If Bush pursues - as he now has a mandate to do - an assertive military policy, the consequences are likely to be an increase in defence spending and an obstacle to cutting the US budget deficit.

The chances for early resolution of the conflicts in...

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