26 September Ecofin informal

Date: 01/10/1998

EU FINANCE ministers failed to agree on who should speak for EMU participants at international policy-making meetings. France's Dominique Strauss-Kahn argued that the euro zone should be represented within the Group of Seven by France, Germany and Italy in rotation. But Belgium's Jean-Jacques Viseur suggested instead that one of these countries should be given vice-presidency of the Euro-11 ministerial coordinating group, or that the Euro-11 president should do the job. Ministers agreed that they should try to resolve the issue in time for their scheduled meeting on 1 December.

THE meeting issued a communiqué on the world economic crisis, stressing that solutions to problems depended on “national economic and political situations”. Ministers agreed that Asian nations should concentrate on “restructuring” their banking systems and capital markets for companies. “Further restructuring of the banking sector in Japan is of utmost importance in this respect,” they insisted. Ministers welcomed the formation of a government in Russia under Yevgeny Primakov. However, they warned him not to “revert to a command economy, but to proceed along the path of structural reforms in order to establish the foundations of a social market economy”. Michel Camdessus, managing director of the International Monetary Fund (IMF), briefed ministers on the current situation in Moscow and stressed that a 3.7-billion-ecu aid instalment would not be released for “some time”.

THE Council advised investors against punishing Latin American countries which were “pursuing essentially sound policies” and said they would call for “greater awareness of the diversity of prospects in emerging markets”. European Central Bank President Wim Duisenberg told the meeting that he expected euro-11 growth to slow down only slightly next year to 3.0&percent; compared with earlier expectations of 3.2&percent;, making calls for global interest rate cuts exaggerated. “There is no general opinion to strive for interest rate reductions,” said Dutch Finance Minister Gerrit Zalm.

AUSTRIA's Rudolf Edlinger, who chaired the meeting, claimed that ministers had agreed to set themselves a nine-month deadline to complete negotiations on introducing a common system for taxing interest income. “We agreed to draft and possibly adopt guidelines by the end of the next presidency,” he said. However, Luxembourg's Economy Minister Robert Goebbels denied this.

MINISTERS reached agreement that the Greek drachma would participate in the new Exchange Rate Mechanism (ERM II) with a standard fluctuation band of 15&percent; either side of a central rate against the euro. They also decided that the Danish krone would join, with bands of 2.25&percent; against the euro. “The agreement concerning the Danish krone is based on the high level of convergence achieved by Denmark in terms of the convergence criteria, including the very high degree of stability of the krone in the markets and the unchanged parity within the ERM since January 1987,” they said in a statement.