25 September Euro-11

Date: 01/10/1998

AUSTRIAN Finance Minister Rudolf Edlinger hosted an 'open' gathering of euro-zone treasury chiefs plus those from the UK, Greece, Denmark and Sweden. They discussed a paper prepared by Edlinger's staff which set out guidelines for economic coordination once monetary union has begun. This analysed the macro- and microeconomic effects of the single monetary policy and the “enhanced need for reform” through the EU's existing instruments covering employment, budgetary surveillance and 'broad economic guidelines'. However, German Economy Minister Günter Rexrodt felt the paper was an attack on the independence of the European Central Bank and left the meeting.

MINISTERS agreed to support the candidacy of Italian Treasury Minister Carlo Azeglio Ciampi as chairman of the International Monetary Fund's policy-making interim committee. If other members of the IMF agree to his nomination, Ciampi would take the place of former Belgian Finance Minister Philippe Maystadt, who stepped down in June.

ECONOMICS Commissioner Yves-Thibault de Silguy warned ministers that failure to rein in their budget deficits further now could lead them to breach the rules of the growth and stability pact in future. This is because the euro-11 governments' structural deficits - the gaps between spending and revenues once the effects of economic growth are stripped out - are still too wide. “Structural deficits are still around 2&percent; of gross domestic product,” said De Silguy. “If growth slows down, then nominal deficits will rise and the terms of the stability and growth pact will be broken. That's why I'm saying, 'be careful, be careful'.”