Brussels, 09/02/2004 (Agence Europe) - The analysis of the G7 results was the main point dealt with by the Eurogroup in Brussels on Monday evening. The Eurogroup Ministers were to confirm heir concern on excessive movements in exchange rates, formulated in the declaration adopted by Eurogroup on 19 January. They were also to express their satisfaction, following the adoption of a G7 communication reflecting the same concerns, the Irish Presidency announced on Monday morning (see above). The Eurogroup was also to assess the economic landscape, and examine the multi-annual budgetary programmes of seven countries. The issue of the French deficit was also to be making an appearance.
The Finance Ministers also discussed the membership of the ten accession countries' currencies to the Exchange Rate Mechanism (ERM II). The discussion was to focus on the technical requirements for accession to the mechanism, but no decision was expected at this stage. Brought in in 1997 to replace the European Monetary System, ERM II requires national currencies to stay within a margin of 15% of a central rate.
Last December, the European Central Bank published a report warning against the ten joining the exchange mechanism too soon. "Given the risks attached to any premature rigidity in interest rates, it would doubtless be better for the new States not to consider applying to join the ERM II until they have reached a high degree of convergence", wrote the ECB. It also feels that certain States should consider joining the ERM II longer that the period of two years planned before joining the Euro. The ECB insisted that decisions to admit new Member States to the mechanism should be taken on "a case-by-case basis". This decisions should be based on "a wide range of economic indicators and evolutions, and taking into account the market rate. The result of this assessment cannot be pre-determined by one of the parties to the agreement".
During a meeting in Prague earlier in the month, Commissioner Pedro Solbes also insisted that the acceding countries continue their structural reforms and assess their needs in terms of exchange policy, before joining the ERM II (EUROPE of 4 February, p.15). On this occasion, IMF Director General Horst Koehler had been cautious, stating that the new Member States should fulfil requirements sometimes going "beyond the requirements of the Maastricht Treaty for public deficit criteria and public debt". The carefulness of the finance ministers was stepped up by the economic situation in Hungary, which had to raise its interest rates from 9.5% to 12.5% in December due to speculation. Although the Baltic States already fulfil the "Maastricht criteria", Budapest still had a deficit of 5.6% of GDP in 2003.