13 September Ecofin Informal

Date: 18/09/1997

EU FINANCE ministers agreed that the bilateral exchange rates of currencies taking part in economic and monetary union would be announced at the same time as a decision is taken on which countries are to participate, in April or May next year. These will represent the bilateral rates at which national currencies will be fixed irrevocably on 1 January 1999. Luxembourg Premier and Finance Minister Jean-Claude Juncker denied this meant that a decision had been taken about what these rates would be based on.

OFFICIALS also stressed that an early announcement of the rates would only give a partial indication about the external value of the euro against currencies such as the dollar and yen, because the Maastricht Treaty states that the euro should have the same external value as the ecu. The non-EMU currencies within the ecu basket will continue to fluctuate until EMU starts.

MINISTERS also agreed that they should only very rarely seek to influence the single currency's exchange rate. They would, however, reserve the right to steer the currency's level if it became very distorted - perhaps taking a similar approach to the Group of Seven - but would not regularly set targets to guide markets. “For us, the currency rate is the result of a certain policy, rather than the policy being targeted to a particular rate,” said German Minister Theo Waigel.

FRENCH Minister Dominique Strauss-Kahn called for a formal 'euro council' to coordinate policies under monetary union. The most likely arrangement will be a system under which euro-zone countries meet informally to discuss policy, but leave real decisions to full meetings involving all EU countries.

GERMANY and the Netherlands used a discussion of the Union's future budget plans under Agenda 2000 to claim that they carried too much of the burden of financing the Union in comparison with their EU partners. With similar noises coming from Sweden and Austria, there were fears that there could be a return to the sort of budget dispute which paralysed much EU business in the early 1980s. Waigel claimed Germany had to bear 60-70&percent; of the net financial burden every year. But Belgium's Philippe Maystadt said that any attempt to extend the UK's rebate would be against the spirit of the Union.

COMMISSION President Jacques Santer called for an objective debate and warned against anything which might delay the start of enlargement negotiations next year. He promised a Commission paper on net budget contributions in time for finance ministers' next meeting on 13 October.

MINISTERS agreed to take action to limit damaging tax competition between member states. They said they would try to reduce the overall tax burden, while respecting subsidiarity in fiscal matters, and investigate company taxation and charges on savings. On corporate taxation, ministers agreed to establish a code of conduct and a monitoring system to follow developments, further details of which will be sorted out in October.

TAXATION Commissioner Mario Monti welcomed the large consensus reached on a number of points, and said ministers agreed on the need to reduce the negative effects of taxation on employment and to coordinate national fiscal policies - rather than aiming for total harmonisation. It was agreed that the taxation working group would finalise the text of the code of conduct in time for the 13 October meeting of finance ministers and that the employment summit in November would take a broad look at questions of taxation.