Commission threatens to scupper G7 deal

Date: 01/07/1999

By Tim Jones

THE outgoing European Commission is threatening to scupper a carefully wrought agreement over who should represent euroland at meetings of the world's top monetary chiefs.

Caretaker President Jacques Santer and his economics chief Yves-Thibault de Silguy are deeply unhappy with the deal struck with the Americans at a meeting of Group of Seven finance ministers in Cologne last month which excludes their institution from the euro-zone delegation.

"This is an important question of institutional balance." said a Commission official. "Both Santer and De Silguy are prepared to go to the wire over this."

The institution's top economic policy officials have been ordered to underline their opposition to the deal at a meeting of the EU's secretive Economic and Financial Committee next Tuesday (6 July). Without a formal proposal from the Commission, the legislation would founder.

EU leaders agreed at last December's summit in Vienna that the euro area should be represented at G7 finance meetings by European Central Bank President Wim Duisenberg and the chairman of the Euro-11 ministerial coordinating group, and that the two should be "assisted by the Commission".

This in itself was a compromise, watering down an original Commission proposal which would have ensured that De Silguy or his successors became full euro-zone team members at gatherings of the G7.

At the G7 meeting in Cologne, German Finance Minister Hans Eichel managed to persuade reluctant US policy-makers to accept the presence of the Euro-11 chairman during discussions on the euro. In return, incoming Bundesbank president Ernst Welteke, Bank of France governor Jean-Claude Trichet and Bank of Italy chief Antonio Fazio would withdraw and the Commission would not be allowed in.

Santer and De Silguy were outraged, not just by the agreement but also by the failure of the German, French and Italian governments to spell out the deal to them in detail, leaving them to read about it in the press.

The two feel so strongly about the issue that they are prepared to fight the proposal even though Santer is due to stand down as Commission president on 19 July and take a seat in the European Parliament and De Silguy is far from certain to win a second term in the Commission.

"External representation should be assigned in accordance with the share-out of competences between the institutions." said another Commission aide. "The only possible legal base for agreement is the proposal made by the Commission under Article 109(4)."

This Maastricht Treaty clause specifies that ministers must decide euroland's external representation "in compliance with powers" set out in another article setting out the Commission's role in monitoring the euro zone.