EMI resolves currency questions except name

Date: 16/11/1995

By Tim Jones

THE forthcoming EU summit in Madrid can devote itself to finding a name for the future single currency now that most of the detailed questions concerning the transition have been answered.

Pressure for a decision is growing. “How can you carry out an information campaign if you don't even know the name of your product? We have got to dispel unease about it and that means making a decision on the name,” Commission President Jacques Santer complained to the Parliament yesterday (15 November).

Apart from the name, a 48-page report from the European Monetary Institute (EMI), the Frankfurt-based council of EU central bank governors, answered most questions on the currency.

A summit in late 1997 or early 1998 will choose a list of countries ready and willing to form an economic and monetary union from 1 January 1999, based on their recent economic performance.

For the participating countries, exchange rates will be locked in January 1999 and left like that until July 2002, at the latest, when national currencies will have been withdrawn and replaced with whatever the Madrid summit decides to call the new currency.

This does not mean that all the issues have been addressed. Finance ministers meeting in Brussels on 27 November and the summit itself will still have to decide whether government bonds should be swapped into the European currency soon after January 1999.

But the bulk of the work on the transition has been done, although the question of what to do with traditionally volatile currencies which remain outside the single currency bloc looks set to be put off until 1998. This is a question of special interest to German, French and Benelux industries worried they could be locked into a permanently uncompetitive exchange rate against rivals in the UK, Spain and Italy.

An EMI working paper on the issue has been circulated, but has concentrated on the issues of principle involved rather than detailed proposals on how to construct an Exchange Rate Mechanism II.