EU leaders pick bank chief amid controversy
08:42 p.m May 02, 1998 Eastern
By Paul Taylor
BRUSSELS (Reuters) - European Union leaders chose Dutchman Wim
Duisenberg on Sunday to head the central bank that will manage their
single currency, but the deal curtailing his term was denounced as a
disastrous launch for the euro.
After more than 11 hours of wrangling, the leaders appointed Duisenberg,
62, head of the European Monetary Institute, as president of the
European Central Bank nominally for a full eight-year term.
But under a pre-arranged scenario, he immediately informed them that on
age grounds he intended to stand down once euro banknotes and coins
replace national currencies in the 11 founder states in 2002, and the
summit agreed that French central bank governor Jean-Claude Trichet
would succeed him.
Economists in the financial markets scorned the arrangement as a
political fudge, saying it would undermine the credibility of the
fledgling currency to be launched in January.
The president of the European Parliament, Jose-Maria Gil Robles,
compared the deal to the birth of a deformed baby and told reporters he
had ''no doubt'' it breached the spirit of the Maastricht treaty on
European union.
The parliament can withhold approval from ECB appointments, which would
be politically damaging, but it cannot veto them.
''I would say it's no good at all for the European Central Bank to start
like this,'' Gil Robles said.
British Prime Minister Tony Blair, who brokered the deal after hours of
arm-wrestling among France, the Netherlands and Germany, denied that the
outcome was ''a fix or a fudge.''
He insisted it preserved what he called the sanctity of the treaty since
Duisenberg was retiring of his own free will and would set his own
departure date.
European Commission President Jacques Santer sought to head off any
legal challenge by saying that the Commission, as guarantor of EU
treaties, certified the agreement's conformity with the letter of the
Maastricht treaty.
When French President Jacques Chirac, who had initially insisted on a
specific departure date, told a news conference that Duisenberg had
decided entirely of his own accord ''for personal reasons'' not to
complete his term, reporters burst into laughter, drawing a presidential
rebuke.
''Don't laugh, there's no reason,'' Chirac said.
The French leader said the agreement had taken so long because of the
risk that it might be challenged in countries such as Germany which have
constitutional courts.
The summit appointed Frenchman Christian Noyer, a former Treasury
director, as ECB vice-president for four years.
Other members nominated to the executive board were Bank of Italy board
member Tomasso Padoa Schioppa, Bank of Spain board member Domingo
Solans, German Bundesbank chief economist Otmar Issing and Bank of
Finland governor Sirkka Hamalainen.
The leaders also agreed that future appointments would take account of
the principle of rotation among member states which were not represented
initially on the board.
The horse-trading over the bank presidency overshadowed the historic
decision to launch the euro on January 1, 1999, with 11 founder members.
Germany, France, Italy, Spain, the Netherlands, Belgium, Finland,
Portugal, Austria, Ireland and Luxembourg will form the world's second
biggest economy, equivalent in population, output and trade to the
United States.
Britain, Sweden and Denmark opted to stay out of the launch, while
Greece intends to join in 2001, by which time it will have met the
strict economic convergence criteria.
The European Parliament formally approved the launch on Saturday with a
standing ovation.
Dutch Prime Minister Wim Kok, who faces a general election on Thursday,
put a brave face on Duisenberg's truncated mandate, saying it was an
undoubted success for the Netherlands and ''a good signal to the
markets.''
But market economists were withering in their criticism. Peter Praet,
chief economist of Belgium's Generale Bank, said: ''The damage is
already done...This leaves a very bad taste.''
Both he and Commerzbank economist Juergen Pfister in Frankfurt said the
central bank might have to set higher than necessary interest rates when
it begins operating next year to restore credibility.
EU finance ministers also confirmed on Sunday that EMU would be based on
existing bilateral central rates.
Copyright 1998 Reuters Limited |
