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Myra MacDonald
Vienna, Sept 26: European Union finance ministers were on Saturday set to tackle the divisive issue of who should speak for the euro-zone in the outside world when the euro single currency is launched in January 1999.
But officials said ministers were unlikely to make much headway and may end up putting off a decision to the last mintute, leaving heads of government to work out a deal at a summit in Vienna in December.
France has suggested that the three biggest economies in Economic and monetary Union -- itself, Germany and Italy -- should take turns at representing the euro zone at such meetings as the Group of Seven, of which all three are members.
But, smaller countries want to pass the role round among the 11 EMU members and are incensed at the idea that the common currency project should be dominated by the big countries.
"(The French proposal) immediately produced allergic reactions from small and medium-sized countries," one EU official commented.
Despite likely failure to come up with aspokesman, EU ministers were nonetheless hoping to hammer out some kind of common response to the crisis in emerging market economies.
Officials said that they could come up with a statement encouraging Russia to pursue economic reforms.
France is also hoping that EU ministers will rally behind French and British calls for a radical overhaul of the international financial system.
Officials said there was general acceptance that prudential rules had to be tightened, extending for example solvability ratios which apply to banks to hedge funds.
Some ministers and officials have also said they could support the idea that emerging economies facing severe crises could be given the right to impose temporary and limited controls on capital movements.
The idea represents a radical change to the prevailing philosophy which lays all the stress on liberalising capital flows.
With Germany facing elections on Sunday, however, officials said they doubted that EU ministers would be able to make much significantprogress on their views for overhauling the financial system.
German finance minister Theo Waigel abandoned plans to join the talks on Saturday after his car was delayed in traffic on the way to Stuttgart airport, a German official said.
Ministers, beginning the second of two days of informal talks in Vienna, were also expected to approve the entry of the Greek drachma and Danish crown to a new European Exchange Rate Mechanism, the ERM2, which will tie currencies of countries outside EMU to the euro.
Denmark wants the crown to be tied to the euro with limited fluctuation bands of just 2.25 per cent, while Greece is seeking standard fluctuation bands which allow currencies to move up or down 15 per cent against the euro.
On Friday, EU finance ministers reviewed the prospects for growth and the risks to the region of the economic crisis which started in Asia, and then spread to Russia and now seeping into Latin America.
Officials and ministers stressed there was no reason for panic about Europeangrowth.
Although the growth rate was likely to be clipped by economic crisis elsewhere, it was still seen at around 2.8 per cent this year and at least 2.5 per cent next year -- making Europe's economy probably the strongest in the world.
However, officials said the European Commission was nonetheless putting pressure on EU members to take firmer action on budgets to head off any risk that slower growth might produce higher-than-expected budget deficits.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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