De Silguy faces defeat in bid to represent euro zone at G7

Date: 12/11/1998

By Tim Jones

GOVERNMENTS are set to shoot down a bid by the European Commission to represent the 11-nation single currency area on the world stage.

After discussions within the EU's powerful monetary committee, top national treasury and central bank officials will recommend excluding the Commission from the euro-zone's diplomatic team at meetings of the Group of Seven leading industrialised countries.

"Most members of the monetary committee felt that the Commission did not need to be represented," states a paper prepared by the panel for ministers.

This advice, if it is accepted by finance ministers when they next meet on 23 November, will come as a heavy blow to Economics Commissioner Yves-Thibault de Silguy.

He has campaigned hard to win a place for the Commission at meetings of G7 finance ministers, where key decisions are taken on stabilising currencies, reforming markets and bailing out crisis-hit countries.

A week after the G7 unveiled a plan to bolster the world financial system and prevent a repeat of last year's 'Asian contagion', De Silguy formally proposed that he should always be part of a three-member euro-zone delegation at international gatherings.

Under his plan, the delegation would be made up of European Central Bank President Wim Duisenberg, the Economics Commissioner and the serving chairman of meetings of the EU's Council of Finance Ministers, known as Ecofin. If this were a British, Swedish, Danish or Greek minister, the head of the Euro-11 ministerial group would go instead.

During monetary committee discussions, the G7 members of the euro-zone - France, Germany and Italy - along with the British and Dutch, were adamantly opposed to this approach. Only the Belgian delegation gave the Commission its wholehearted support.

Most monetary committee members felt that although the Commission had a treaty-enshrined role in determining the Union's common monetary and economic policies, it would be overstepping its powers if it took part in international negotiations on these issues.

Instead, the committee paper stresses the role of the national euro-zone members of the G7 in representing the single currency area, together with Duisenberg.

It recommends that when the G7 is monitoring global market developments or discussing exchange rate volatility, "representatives of the member states who are already members of these fora should help to achieve this [representation]".

However, when discussions turn to economic and monetary union, the president of Ecofin or the Euro-11 would be invited to participate. To ensure that he or she was speaking for the whole single currency area, "there could be an exchange of views on euro issues in the Euro-11 group before meetings of the G7".

Current European members of the G7 are wary of expanding the European delegation too much for fear of antagonising the US, which already feels the old continent is over-represented. For this reason, notes the monetary committee, "solutions may have to be found if international partners oppose the wish to increase the number of European participants beyond present levels".

One obvious way to cut delegation sizes would be to exclude the governors of the Bank of France, the Bank of Italy and the German Bundesbank, since they will be represented by Duisenberg, says the paper.

However, governments differ over who should represent the euro area when the G7 turns from straightforward monetary policy issues to questions of jobs, structural reform and 'surveillance' of each other's policies.

The committee has left this decision open for ministers, simply presenting a range of options. Its paper states that the French, German or Italian delegations could represent the euro-zone, either acting independently or presenting an agreed position. The third option, of appointing a G7 minister as a Euro-11 vice-president, has so far found few takers.