Leaders lock horns with new Euro bank
By Sheryle Bagwell, London
The architects of the single currency may have lofty aims of uniting Europe. But just six weeks before its arrival, it has already set off a power struggle between the fledgling European Central Bank and Europe's left-leaning politicians.
European finance ministers are expected to sign a joint statement next weekend that will seek to exert their political will over the ECB, the institution charged with setting monetary policy -- supposedly independent of political interference -- across the whole "eurozone" of 11 countries adopting the single currency from January 1.
The statement will reportedly call on the ECB to take into consideration not only price stability but job creation when framing policy.
It will also seek a relaxation of budgetary rules to allow countries belonging to the single currency to borrow for public investment.
The draft statement is expected to be signed by all of Europe's 11 left-leaning finance ministers including Germany's Mr Oskar Lafontaine, France's Mr Dominique Strauss-Kahn and Britain's Mr Gordon Brown, at a meeting next Sunday. Titled "The New European Way -- Economic Reform and the Framework of Economic and Monetary Union", the statement will also call on the ECB to be politically accountable for its policies.
It said European Governments should "hold the ECB to account for its actions by generating the necessary openness and transparency for our European-wide policy. Such a policy must be conducive to credibility, predictability and certainty".
The statement is likely to further trouble the ECB which has been fighting off attempts from centre-left leadersacross Europe to interfere in its business. But with unemployment still remaining high in Europe and inflation at historic lows, the politicians believe they have the support of voters who fear a euro run by unaccountable bankers intent on pursuing inflation targets rather than boosting growth and jobs.
"The kind of passive government that we have seen in Europe in the lead-up to monetary union has been detrimental to growth and employment," said Mr Jean-Paul Fitoussi, head of the OFCE, a leading Paris-based economic think-tank that is considered to be close to the French socialist government of Lionel Jospin. Mr Fitoussi added: "The fact that governments now see they have a role to play is good news."
However, a recent poll in a leading German business newspaper suggested that Germans' faith in the stability of the euro has been shaken since the country's new left-wing finance minister, Mr Lafontaine, began his push for governments to have a greater say in the single currency's management and future.
Only 34 per cent of Germans now believe that the euro will be as strong as the deutschemark, compared with 38 per cent last month, while 44 per cent expect it to be weaker, according to the poll.
Mr Lafontaine has been calling for a cut in core European interest rates, which the French and German central banks have so far resisted.
His high-profile role in the new German Government has already led to speculation that a new job may soon be found for him -- as the next president of the European Commission.
Although Mr Lafontaine has dismissed the reports as mere rumours, his shift to the EC would resolve the question in Germany of who is really running the Government, while at the same time extending to Brussels the influence of Europe's burgeoning left.
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