EMU fighting started? Italy is also expected to ask for progress on a dormant plan to
harmonise rules on gold hallmarks in return for signing up to a separate
proposal to exempt investment gold from VAT. Italy is currently blocking
the investment gold proposal. "
ECB's Duisenberg seen entering Euro-11 budgets row
10:48 a.m. Jul 03, 1998 Eastern
By Nick Antonovics
BRUSSELS, July 3 (Reuters) - Finance ministers from the 11 European
Union countries due to launch monetary union in January are expected to
get a warning on budgets next Monday from European Central Bank
President Wim Duisenberg, EU monetary sources said on Friday.
The budgetary issue has been identified by analysts as the key
determinant to whether EMU is an early success or flop.
The argument is that without careful coordination of budgets, monetary
policy alone will have to tackle inflation inside the euro zone --
something which may not be appropriate for some economies, leading to
political confrontation and a risk of breaking up the Union.
Sources said the outlook for 1999 budgets and the ''stability
programmes'' setting out budgetary plans for the next three years, which
all single currency participants are due to present this autumn, would
dominate Monday's meeting.
For European Monetary Affairs Commissioner Yves-Thibault de Silguy, the
issue was ''fundamental,'' one source said.
The Commission was said to be smarting after its nation-specific
recommendations on 1999 budgets -- contained in the EU's Broad Economic
Policy Guidelines and endorsed by EU leaders at their June summit --
were watered down.
That happened at the last Ecofin meeting in June, a day after Euro-11
members pledged to work together on budgetary and economic policy
coordination.
European central bankers were unhappy at the outcome, too, a view
exepected to be reaffirmed by Duisenberg, central bank sources
indicated.
''We must take care to avoid saying one thing and doing another,'' one
source said. ''Credibility is very fickle.''
In an article in newspaper Le Monde published on Friday, Bank of France
council member Michel Albert said there appeared to be ''serious'' risks
that politicians may leave the ECB to do all the work. ''Lack of
coordination and lax budgetary policies would force (the ECB) to respond
with an excessively restrictive monetary policy,'' Albert said.
Several officials said the Commission was pushing for tight budgets in a
number of countries, notably the Netherlands, while pressuring others,
such as France, to maintain budgetary rigour despite expected higher
growth.
This week's lower-than-expected Italian tax returns were not however
thought to be an issue.
''At this stage we cannot come to a clear conclusion if there's a
problem or not as far as (Italian) tax returns are concerned,'' one
source said, noting recent changes in the Italian tax system meant the
timing of returns was more difficult to predict.
Separately, the Euro-11 meeting was due to review for the first time a
new euro-area data sheet prepared by Commission statisticians. The
sheet, containing information on inflation, growth and other indicators,
may be published after the meeting, but would not contain new forecasts,
an official said.
A request from the Benelux nations for foreign ministry representatives
to attend Euro-11 may also be discussed. Some capitals fear this would
make it more like the ''economic government for Europe'' first proposed
a decade ago by France.
Euro-11 meetings are currently restricted to the minister of each
country plus one official, usually the treasury director, Commission
representatives and the chairman of the EU's monetary committee,
currently Britain's Sir Nigel Wicks.
The ECB president is only invited on an ad hoc basis.
The Euro-11 group will meet before a scheduled meeting of all 15 EU
finance ministers - the first ''Ecofin'' to be held under Austria's
presidency of the bloc. Both meetings will be chaired by Austrian
Finance Minister Rudolf Edlinger.
Officials said ministers would formally adopt the Broad Economic Policy
Guidelines and a pledge to adapt EU Value Added Tax legislation to cover
trade on the Internet.
The Commission would also formally present its proposal to leave the CFA
franc/French franc parity unchanged once EMU starts, and raise the
prospect of changing the design of the planned 10 and 50 euro cent
coins.
Italy is also expected to ask for progress on a dormant plan to
harmonise rules on gold hallmarks in return for signing up to a separate
proposal to exempt investment gold from VAT. Italy is currently blocking
the investment gold proposal.
((Brussels Newsroom +32 2 287 6830, fax +32 2 230 5573,
brussels.newsroom+reuters.com)) |
