Luxembourg, 17/10/2000 (Agence Europe) - Confirmed confidence in the euro due to growth prospects remaining favourable and, on the other hand, differences in assessment between the Commission and certain Member States regarding the balance to seek between tax reductions and the accelerated improvement in public finances: these are the messages to have emerged from Monday evening's meeting of the Eurogroup. Confidence in the euro was affirmed at the final press conference by French Finance Minister Laurent Fabius and Commissioner Pedro Solbes. The second message was implicit in the at times different tones in what they had to say. ECB President Wim Duisenberg did not take part in the final press conference, but the Chair of the Eurogroup urged the press not to draw hasty conclusions from this absence. Fabius and Solbes summarized work as follows:
Economic situation and situation on the markets. According to Laurent Fabius, at the end of an "in-depth review", the Finance ministers were "struck by the way the high growth rate was being sustained" in the euro zone. Doubtless they are aware of certain "effects linked to the oil crisis" and "concerns born of the situation in the Middle East", but their analysis for 2000 and prospects for 2001 led them to the conclusion that growth will remain "sustained". For 2000, Pedro Solbes confirmed, the current sound situation "will lead us to growth figures close to those predicted" (between 3.4 and 3.5%) and the figures for 2001 should also "be very close to the forecasts" (3%). A figure that, anyway, "will be higher than many previous years", Fabius concluded.
Regarding the situation of the euro in relation to the dollar, the French Minister also referred to a "unanimous assessment" by ministers: "The need to have a currency more in line with the fundamentals of our economy". And Mr. Fabius went on to explain: "We believe, with proof at hand, that growth is strong and that it will remain sustained. Therefore, the current level of the euro is not in line with the fundamental elements of the economy" of the euro zone. For Fabius, the Eurogroup's analysis has "not varied since September and nor has its line of conduct". As to what he thought the euro's true balanced value should be, Mr. Fabius said that he had "always refrained from defining it to some cents close", preferring to stress that "everyone, ministers and central bankers", were agreed to regard that it should "clearly be higher that it is today", "the economic fundamentals arguing along that line". As to whether further intervention by the ECB on the markets was on the cards, he said that this type of decision was by nature "unpredictable" in the sense that, "to be effective, it must not be expected". Finally, Laurent Fabius said that the ECB was using interest rates to combat inflation, but considered that "the common interest" was "that at the same time as great a growth as possible be maintained", a balance having to be found (which is "never easy").
Situation of public finances. For Laurent Fabius, "there is a reduction in public deficits that is continuing at a good rate". But, "one can hope that this rate should further accelerate", even though "there has already been great improvement". The "elements established in the Stability Pact have been achieved", Commissioner Pedro Solbes confirmed, nevertheless stipulating that the Commission was insisting that it should go faster by using the available margins. In addition, he said laconically, "we have made certain comments on tax reductions in certain Member States". He then stipulated that tax reductions: a) should "never affect the Stability Pact". In Member States that do not yet have a healthy budget situation, the reduction of the deficit should be the primary target"; b) should be "compensated by a reduction in spending; c) may not be pro-cyclic; d) should be "consistent with the long-term public debt". Fabius acknowledged that there had been an "exchange of views" on the increase in spending in volume scheduled by France for 2001 and that there could be "different analyses", even though he agreed with the Commissioner and many of his colleagues on the need to be "very vigilant spending-wide".
Practical preparations for the euro. Ministers discussed the state of preparations and, said Fabius, acknowledged that much work remained to be done. In a joint statement on the cost of the changeover to the euro, they said that had taken into consideration the requests made by several economic sectors, but replied to the latter that: i) the single currency had been introduced in view of leading to substantial gains for the economy as a whole, with positive effects for growth and employment; ii) these benefits were permanent, whereas the costs of the changeover to the euro were one-off and relatively low compared to the foreseeable gains for all economic sectors, which should therefore view it as an investment; iii) these costs must consequently be borne by the sectors concerned; iv) the public sector was assuming its own burden of costs which were significant (production of banknotes and coins, information campaigns, preparing the administrations…), all other sectors whence having to take on board the cost of their efforts at adaptation.