Brussels, 06/02/2003 (Agence Europe) - During a conference organised by the European Commission last week on "The euro, the Mediterranean and the Gulf", Commissioner Pedro Solbes drew up a mixed balance sheet on the use of the single currency in the region. At the same time, the Commission published for the first time an analysis of the economic health of the EU's Mediterranean and Gulf partners in order to nourish "economic dialogues" with these countries and the Commission in the next few weeks.
In his speech, Mr Solbes asserted that the euro was currently playing an important role in the currency exchange rates of 50 third countries. In the Mediterranean region this is the case for Morocco and Tunisia, which use the Euro as the main external anchor for their monetary policy. Mr Solbes recognised, however, that the US dollar remained the main reference currency in most other Mediterranean and Arabian and Arabian Gulf countries, which appeared to reflect the inertia of financial systems and the importance of commodity exports, particularly oil in the case of the Gulf states. In Mr Solbes' view, this helps to explain, "the apparent gap between the low weight of the euro in the Mediterranean exchange rate arrangements, despite the significant institutional, financial and trade relations between the EU and the Mediterranean countries". He underlined that according to IMF figures, 13% of global foreign exchange reserves were held in euros at the end of 2001, as opposed to 68% for the US dollar and 5% for the yen. The Commissioner explained that developments in the Mediterranean region were similar and highlighted the example of the Lebanon, where the euro's share has increased steadily to around 20% of total reserves. The Commissioner also pointed out the positive effects that the EMU could have in the region, notably in ensuring the success of regional monetary cooperation. In this context he pointed to economic policy coordination on the basis of a shared philosophy of fiscal discipline and desirable inflation levels, a high degree of economic convergence, independent central banks, structural reforms, and some form of institutionalised multilateral monitoring.
Inflation rises and budgetary slippage in Mediterranean countries
The Commission document provides an overall view of recent macro-economic and structural developments in nine Mediterranean and Gulf countries (Algeria, Morocco, Egypt, Jordan, Lebanon, Syria, Israel, Gaza and the West Bank). The document informs us that the Mediterranean region represents 8.9% of the EU and that income per head of the population was EUR 8,550 in 2001 - 39% less that the EU level. In 2001 Mediterranean countries registered economic growth of 1.8%, which represented a 50% drop compared to 2000 (4.3%). In 2002, growth remained at a weak 1.6%. The average rate of inflation in the region was less than 2% in 2001 (1.9%) but rose significantly in 2002 to 3.7% in Israel, Gaza and the Jordan where it had previously been 6.5% and 6.7% respectively. The Commission points out that the high level of budgetary deficit "remains worrying" (in 2002 the deficit stood at 15.6% in the Lebanon, 10.1% in the West Bank, 6.1% in Morocco, 3.4% in Egypt, 3% in Syria, 2.2% in Tunisia but was more than 0.4% of Algeria's GDP. The Commission points out that these countries' economies are very dependent on trade and in 2001, the total of their exports and imports reached 68% of their GDP. 51% of trade was with the EU.