Mr Juncker's little phrase. At the end of the week, Germany takes up its second presidency: that of the G-7, which is to meet in Essen at finance minister level. This is a fortunate coincidence, this simultaneous German presidency of the Council of the EU and of meetings with the United States, Japan and Canada on economic and monetary issues (to say nothing of the G8, of which Russia is also a member). And it is significant that the Essen meeting was so carefully prepared for by the Eurogroup on 29 January, with a view to raising the question of exchange rates, that of the Japanese currency in particular (see Albin Birger's roundup in our bulletin 9355). Jean-Claude Juncker, President of the Eurogroup, stated this quite specifically: a large part of the discussion which was held at the end of January was given over to this problem, because “the economic upturn currently visiting Japan must be reflected in the exchange rate”, and he announced that this concept would be revisited in Essen in even greater depth. Mr Juncker stated that the Eurogroup was looking into this issue “as this is a shared competence with the European Central Bank”. However, we all know that Mr Juncker always chooses his words carefully.
That last-quoted phrase, therefore, seems quite clear to me: he was referring to the provisions of article 111 of the Treaty, which confers specific powers on the Council in terms of the exchange rate of the euro and general orientations of the exchange rate policy. This is a turning point which had been expected for quite some time (see this column in the bulletin 9263, last paragraph). This time, however, emphasis is laid on the yen, but tomorrow, it could be the turn of the dollar or any other currency. The Ecofin Council and the Eurogroup take on their political responsibilities, doubtless in agreement with Jean-Claude Trichet, President of the European Central Bank. Mr Juncker and Mr Trichet will, furthermore, attend the meeting in Essen, on account of their respective Presidencies, as will European Commissioner for Economic and Monetary Affairs, Joaquin Almunia.
Two principles. The change was accomplished quietly, with no fanfare and no drums, but the significance is clear: the question of the exchange rate involves the political institutions of the EU, not just the monetary authorities. This does not mean that the exchange rate has become an object for political pressure towards others, but that the two fundamental principles upheld by the IMF and by the G-7 itself must be respected, and these are: a) exchange rates must reflect the basic economic data; b) instability and abrupt variations must be avoided. Nobody is asked to “guide” the rate of their currency, but to use instruments such as the exchange rates appropriately. It is well-known that at the previous meeting of the G-7, the Japanese authorities had applied pressure to ensure that the weakness of their currency was not explicitly referred to in the end press release. This may not necessarily be the case again this time, unless the Japanese authorities can provide valid assurances. And it cannot be ruled out that a reference, direct or indirect, to the Chinese currency may appear, because China's exports enjoy precisely the same advantages that Japan's exports do, due to the current anomalies.
The independence of the ECB is not in question. Could this development endanger the very independence of the European Central Bank (ECB)? Not a chance. Nobody wants this. Mr Juncker has spoken on this subject on several occasions. His speech to the French Senate at the end of last November (a special session of the delegation for European affairs chaired by Hubert Haenel, open to all senators that day) specifically affirmed the need for the ECB to be independent (our translation): “Without an independent Central Bank, we would have a never-ending debate between the countries of the eurozone about monetary policy. This policy must be defined for the whole of the eurozone, without taking account of the problems of such and such a member state or of such and such a group; and in order to do this, it requires an independence of judgment. I, therefore, remain fully committed to the principle of the independence of the ECB, which I defended when I was president of the Inter-Governmental Conference that laid down the conditions for monetary union”. What is happening represents progress in the management of the eurozone and in “permanent and structured” dialogue between the political authorities of the ECB, pending the other vital piece of progress: “fairly strong” coordination of economic policies, since the essential responsibility of the ECB is price stability (Mr Juncker specifically confirmed this, when he congratulated Mr Trichet on the results obtained). (F.R.)