Brussels, 03/05/2000 (Agence Europe) - On Wednesday, the European Parliament's Economic and Monetary Committee chaired by German Social-Democrat Christa Randzio-Plath heard European Commissioner Pedro Solbes Mira and the Vice-President of the European Central Bank, Christian Noyer, present the convergence reports drawn up by the respective institutions on Greece and Sweden's performance over the past two years. Regarding Greece, noting that the ECB's report was "coherent with the Commission's", Mr. Solbes said that the European Commission was proposing that from 1 January 2001 one should consider Greece's preparation for entering the euro zone finalised. Regarding Sweden, on the other hand (a country that has not yet decided to join the euro, even though, contrary to the United Kingdom and Denmark, there is no "opt out" on the subject), Mr. Solbes observed that the necessary conditions had not been met, as its legislation continues to be incompatible with the Treaty and the statutes of the European Central Bank. Mr. Solbes and Mr. Noyer both spelt out how these two countries complied with the convergence criteria (price stability, public finances, stability of their exchange rates and long-term interest rates), stressing that the convergence criteria remained the same for all countries. Answering MEPs, Mr. Noyer remarked that it was "quite natural that the ECB should be a little more cautious than other institutions" and that it underpinned in particular the "risks" and "precautions".
Both Solbes and Noyer recalled that the Commission and the ECB's convergence reports responded to the obligations of Articles 122 (2) and 121 (1) of the Treaty providing for such reports on progress made towards the completion of Economic and Monetary Union by Member States having obtained exemptions being presented to the Council, and that it was now up to the Council to decide, on the basis of these reports and the opinion of the European Parliament, if the exemption may be repealed.
Mr Solbes gave MEPs the following details:
(1) Sweden. Despite the changes made to its legislation in November 1998, the legislation concerning Riksbank still does not allow it to become a full party to the European System of Central Banks. On the other hand, Sweden fulfils the criteria for convergence, since: - the rate of inflation was, on 7 March, 0.8% below the reference value of 2.4% (from this point of view, Sweden is one of the Member States that has been most successful, noted the Commissioner); - the annual public deficit, which was 7.9% in 1995, became a surplus of 1.9% in 1999; - the debt/GDP ratio fell from 77.4% in 1994 to 65.5% in 1999 (hardly more than the reference value of 60%); - the exchange rate criteria was not respected, since the crown, which does not belong to the European exchange rate mechanism (or to EMS-1 or EMS-2) has fluctuated compared to the euro; - the long-term exchange rates are 5.4% (therefore well below the reference value of 2%).
(2) Greece. While in 1998 it did not fulfil any of the four convergence criteria, it has made remarkable progress in two years, achieving: a) an average inflation rate of 2% between April 1999 and March 2000, which was possible thanks to the stability policy practised since the early nineties. The "strong drachma" policy played a fundamental role in controlling inflation, just as the strict budgetary policy followed mainly since 1996, the control of wage costs and the reduction of indirect taxes in 1998 and 1999, said Mr Solbes, who stressed that the Greek government should continue to keep up this austerity policy; b) the annual public deficit fell from 10.2% in 1995 to 1.6% in 1999 (and, according to the Commission's calculations, should fall to 1.3% this year); c) the public debt, on the other hand, only fell from 111.3% in 1996 to 104.4% in 1999, but it is hoped it will fall below the 100% mark in 2001; d) as far as the rate of exchange is concerned, the drachma took part first of all in the EMS-1 and then in EMS-2; - the long term interest rates were, on average, 6.4% during the period April 1999 to March 2000.
Mr Noyer, speaking on behalf of the European Central Bank, mainly remarked:
(1) Sweden. a) Despite the fall in inflation, recent forecasts indicate increasing upward pressure. Inflation should therefore be around 1.5% in 2000 and about 2% in 2001; b) the budgetary surplus should reach 2.4% of GDP this year and the debt/GDP ratio should fall to 61.3%. The new pension system should reduce pressure on public finances; c) Sweden should fulfil the exchange rate criteria if it wants to adopt the euro. The interpretation of the Treaty by the Bank is that a country must have been part of EMS-2 for two years in order to meet this criteria. Since early 1999, the crown has appreciated considerably in relation to the euro, which reflects normalisation of the situation after the crisis in autumn 1998. Regarding "legislative convergence", the status of the Riksbank does not allow the bank's integration in the ESCB, and the legislation on access to public documents should be examined in the light of the ESCB regime concerning secrecy (in order to change the Swedish provisions on this we would also have to change our Constitution, exclaimed Mr Schmid, Swedish United Left member).
(2) Greece. a) The recent fall in inflation has partially been due to temporary factors such as the reduction of indirect taxation. In addition, according to Mr Noyer, possible alignment of Greek interest rates with those of the euro zone will exert upward pressure on prices; b) the Greek debt is "slowly" falling despite the fiscal surplus and the privatisation receipts; c) the volatile nature of exchange rates has been significantly reduced and, after progressive depreciation in 1999 and revaluation of the key rate of 3.5% in January 2000, the drachma came close to the central rate in April. At a general level, Mr Noyer stressed the need to pursue rigorous budgetary policies and structural reforms and also to: transpose legislation more swiftly on the internal market in the national body of law; progress in liberalisation of a certain number of network industries, overcome structural inflexibility on the labour market. Regarding "legal convergence", if the new status of the Bank of Greece is ratified in the time foreseen and certain obsolete provisions are eliminated, there will be "no more imperfections" preventing integration of the Bank in the ESCB.
During the debate, German Christian Democrat Mr von Wogau expressed concern about the sustainability of controlling inflation in Greece and of the still high level of the debt. Mr Solbes replied that the Commission shares these concerns for the future but is confident that Greece will follow the appropriate policy. Greek Socialist Mr Katiforis spoke, with regard to the positive reports on his country, of a "celebration day", while Mr Theonas (Greek United Left member) asked what Greece will still be asked to do. He expressed the fear of seeing an "incredible" austerity policy being implemented in his country. The EU is a community of values, not a bazaar, exclaimed Mr Karas, Austrian member of the EPP Group, while Ms Randzio-Plath said that any fear of the EMU being weakened as a result of Greece's entry is completely unfounded.