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Europe: EU Summit Sets Stage For Era Of The Single Currency

  • Breffni O'Rourke

Prague, 30 April 1998 (RFE/RL) -- European Union leaders meet in Brussels this weekend (May 1 to 3) to breathe life into the European single currency. The 15-nation summit is a defining moment in the process to replace most of West Europe's currencies with just one, the euro.

The meeting will formally select those countries which will participate in the new euro zone starting on January 1. It will also announce the bilateral conversion rates fixing the value of the euro against outgoing national currencies.

Eleven of the EU's member states are planning to join the euro zone from the start, and are considered eligible to do so. They are Germany, France, Luxembourg, Belgium, the Netherlands, Ireland, Austria, Spain, Portugal, Italy and Finland. Greece also wanted to join, but is ineligible because it could not meet the economic criteria. Britain, Sweden and Denmark have chosen not to participate in the new currency for now.

At the Brussels summit, the assembled EU leaders are expected to rubber-stamp the list of 11 applicants. It's doubtful that there will be any contentious debate on the subject, even though there has been some concern about whether Italy in particular is really economically fit to join.

European Monetary Union will create a currency which in terms of its international weight will be second only to the U.S. dollar. The Gross Domestic Product of the 11 participants is roughly the same as that of the United States, and their share of international trade is slightly bigger.

The project however is controversial, as the instant creation of a single currency zone encompassing so many sovereign countries at diverse stages of economic development is unprecedented. The relentless drive towards the euro has been fueled more by the will of political leaders for closer European integration than by clear economic concepts. The European public is uncertain where the path will lead, and experts are divided on what is likely to happen. Despite that, the business sector in general is strongly supportive. From North, South, East and West of the EU, business people give their opinions.

In Finland, Ilkka Karvonen, marketing director of a clothing company says:

"In principle we prefer this kind of new monetary system because we are exporting more than 90 per cent of our whole production and that means we don't want to have any kind of bureaucracy or paper walls between countries, that's why we would like a more elastic system between the countries."

In Italy, Sabrina Daniella, of the Treviso Entrepreneurs Association, says:

"The idea is very positive, because Europe needs a pan-European culture, and this is an excellent means of developing such a concept. It's not enough just to have unity at state level, but one should guide people to a common vision of the future and about the global world. It's a good idea to start with entrepreneurs."

In Austria, Albin Berendt, manager of a building supplies company, says:

"The euro will be positive for the European economy. Its a good thing. One of the biggest problems faced by mid-size European business is the presence of so many currencies, which cause considerable costs through the need to change them and because of the uncertainty in their value."

In Ireland, Brendan Palmer, director of a trucking firm says:

"It's a good thing: one of the biggest issues for business people in Europe has been the total cost of transporting goods between the different markets, specifically since the opening of the single market in 1993, when border controls disappeared. Now the biggest issue has been the cost of changing from one currency to another."

Despite appearances, the summit of EU leaders in Brussels will not be merely ceremonial. That's because there is one burning issue not yet settled, namely the choice of president for the new European Central Bank. The Frankfurt-based bank comes into existence in two months, and the summit is to pick its executive board members.

The presidency of this powerful financial instrument is the subject of a bitter row between France and Germany. Paris wants the ECB headed by Bank of France Governor Jean-Claude Trichet. Germany, like most of the EU partners, wants the post to go to Dutchman Wim Duisenberg, who heads the present European Monetary Institute, the ECB's forerunner.

The dispute is unsettling the European stock markets, which worry that the row reflects deep Franco-German differences on economic policy to be set in the new euro zone. Reports of possible compromises have been circulating, but the summit may prove unable to reach agreement, thus leaving the matter to be resolved at a later date.