German parliamentarians seek assurances on EMU
05:26 a.m. Apr 03, 1998 Eastern
By Douglas Busvine
BONN, April 3 (Reuters) - Bonn politicians pressed Bundesbank President
Hans Tietmeyer and European Commissioner Yves-Thibault de Silguy on the
viability of European monetary union on Friday, seeking assurances the
euro would not hurt the German economy.
Addressing a joint session of the finance and social affairs committees
of Germany's lower house of parliament, the two faced several rounds of
questions on which nations should join the monetary union and how the
euro would affect inflation and interest rates.
Tietmeyer painted a sober assessment of life under the euro, warning
that the single currency project will face tough tests.
De Silguy, trying to reassure parliamentarians, promised that the
European Commission would take action needed to ensure a stable euro
and, looking ahead, suggested that the next step was to bring European
tax levels into line with one another.
Stressing the positive, he said he fully stood by a Commission report
published last week which recommended that EMU kick off in 1999 with 11
member countries.
Tietmeyer, noting that EU inflation was now at a ''pleasingly low
level,'' warned however that some nations had only short histories of
economic stability and that it was yet to be seen if price stability
could be achieved during periods of faster economic growth.
''A culture of stability cannot be seen as secured,'' Tietmeyer said.
Noting that neither the Bundesbank's nor the European Monetary
Institute's (EMI) reports on convergence for monetary union had
contained a recommendation for which countries should take part, he
declined to make such a assessment.
The doubts expressed in the Bundesbank and EMI reports ''were expressly
on the basis of the assessment of convergence .... and do not refer to
the membership (of EMU),'' Tietmeyer said.
The Bundesbank report had concluded that EMU was ''justifiable from a
stability perspective,'' he noted.
Pressed again to make clear whether he would back an 11-member EMU, he
said only that the Bundesbank report offered an ''implicit comment'' on
how many should be in EMU.
He went on to say that the EMI had shown Belgium and Italy how to get
their finances in order for monetary union.
Both countries' debt in 1997 was some 120 percent of national output,
twice the Maastricht treaty's recommended ceiling.
''Significant budget surpluses must be achieved,'' he said.
De Silguy offered a more upbeat assessment, promising that the European
Commission would make sure that participants in monetary union lived up
to their budgetary commitments.
One-off budgetary measures, which were used in several EU nations in
1997, would have to be made sustainable, he said.
''We will monitor the situation very carefully to make sure that one-off
measures will become sustainable.''
''As guardians of the treaty the commission will make sure that these
(budgetary) commitments are abided by.''
The next focus for the EU after economic and monetary union (EMU) would
be tax harmonisation, he said.
''I think we are looking at harmonisation. This is necessary, otherwise
there will be tax losses in some states.''
Speaking about Belgium and Italy, the EU Commissioner said there was
reason to believe that both nations were making good progress in
reducing debts.
He added that the commission had strictly checked the economic
conditions in the candidate nations, and that all other convergence
criteria would be fulfilled by the 11 selected to launch European
monetary union.
((Frankfurt Newsroom, +49 69 756525, frankfurt.newsroom+reuters.com))
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