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EU: European Central Bank Aims To Smooth Path For Easterners

  • Breffni O'Rourke

The European Central Bank, monetary guardian of the European Union's single currency zone, is placing a priority on helping EU eastern candidate countries make a smooth entry into the European monetary system. The executive board member in charge of the bank's international relations, Tommaso Padoa-Schioppa, speaks about the importance of this task to RFE/RL correspondent Breffni O'Rourke.

Prague, 2 March 2000 (RFE/RL) -- The European Central Bank, which came into existence 15 months ago along with the euro currency, is taking an increasing role in preparing the EU candidate members for accession to the union.

The ECB is stepping up cooperation with the 12 candidate countries to prepare them for integration into the European system of central banks and, later, into the eurozone itself.

Unlike the present EU member states, the incoming countries are not being given an option about joining the common currency. They will have to adopt the euro as soon as they meet the requirements -- even though this does not have to be at the same time as they join the EU itself.

One of the bank's top officials, Tommaso Padoa-Schioppa, says the Frankfurt-based ECB is developing direct contacts and exchanges to provide technical help to the candidates, and is also coordinating the assistance to the east given by the national central banks in the present eurozone. He says:

"This is one of our main priorities today, we have bilateral contacts, multilateral contacts, we had in Helsinki a conference [in November] with the governors of the 12 accession central banks, and this is very much part of our work now."

The aim is to help accession countries to develop their economic programs consistent with those prevailing in the euro area, under headings such as price stability, sustainability of public finances, exchange rate stability, and convergence of interest rates.

Asked which candidates were making the best progress, Padoa-Schioppa said results so far are varied, and the preparatory work is "far from being completed." He declined to name specific countries, but he did offer encouragement, saying it's just a "question of time" for all the candidates:

"What I can say is that by traveling to these countries, I do see in most of them the prospect of accession to act as a very, very powerful incentive to conduct good policies, both in the micro-economic field and the macro-economic field, which means development of markets, sound fiscal situation, improving the independent status of the central bank, and developing the financial system."

The euro currency itself has had a difficult time since its birth 15 months ago, and has lost nearly 20 percent of its initial value against the U.S. dollar. There's been no clearly defined reason for this lack of confidence, although uncertainty surrounding the interest rate policies of the ECB itself are widely cited as being a contributing factor.

The accession of another 12 members to the eurozone will probably take place within a decade. That raises the question of whether these newcomers, with their widely differing levels of economic development and maturity, could bring with them into the eurozone an extra element of complexity which could add to the euro's difficulties. Padoa-Schioppa, however, sees no possibility of this:

"Considering that the size of the euro area economically and from a monetary point of view is so overwhelmingly greater than the size of even all the accession countries taken together, it is hard to imagine that the euro area or the euro could be weakened or destabilized by any development in accession countries."

He notes that the total gross domestic product (GDP) of the 12 accession countries is less than 6 percent of the GDP of the total euro area. The euro, in his view, will be able to weather the absorption of more countries into its domain.