Tough ‘stability council’ rejected

Date: 10/07/1997

By Tim Jones

IN A further blow to France's efforts to counter the might of the future European Central Bank, monetary policy-makers are poised to rebuff calls for a powerful 'stability council' of euro-zone ministers.

Senior officials say the French approach will be firmly rejected when work is completed on an inquiry commissioned for the Luxembourg summit in December.

The report will simply clarify the ability of member states to pool economic policies, but will not grant new coordinating powers to the stability council.

Given that the ECB will also retain effective control over the euro's exchange rate through its obligation to maintain price stability, this amounts to a total rejection of French attempts to give politicians a determining role in economic decision-making.

The idea of a council of euro-zone finance ministers with its own joint policies and voting powers was first raised by the former Conservative French government, but has been championed with even greater fervour by new Socialist Prime Minister Lionel Jospin.

Member states' officials given the task of tightening up joint economic policy by the recent Amsterdam summit have already concluded that anything other than a loose, informal club would violate the Maastricht Treaty.

Coordination of economic policy - taxation, labour and product market reform - will be based on Article 103 of the treaty, which stresses that all governments should “regard their economic policies as a matter of common concern”. Finance ministers should coordinate their approach to these policies rather than act independently.

Officials will stress the importance of the annual 'broad economic guidelines' in establishing the basis for pooling policies.

Every year, the European Commission drafts guidelines for the policy performance of both the Union and particular member states. Once agreed by a summit and finance ministers, these take on legal force.

To answer the charges that they are a meaningless annual exercise for economists, national officials stress that the guidelines are also given enforcement teeth.

The Commission has the power to scrutinise the economic policies of member states and, if they are diverging from the agreed position, call on ministers to pass a motion of censure against them.

“This has not really been used yet, but stressing the importance of this element in Article 103 could go a long way towards showing a genuine coordination of economic policy,” said one official. “It could flesh out this side of policy in the same way that the stability pact did for the 'excessive deficit procedure' in the treaty.”

Even though France has only won unqualified support from Belgium in its pursuit of an élite stability council, all member states recognise that some forum exclusively for euro-bloc finance ministers is inevitable. Indeed, the treaty makes it clear that most euro-zone decisions can only be taken by a vote of its members.

Nevertheless, the German government is insistent that these votes should be taken at normal EU ministerial meetings and that no decisions of the 'club' should interfere in ECB monetary policy.

“The notion of a stability council has been accepted by the [German] government, but we have made it very clear to the French that this will only be an informal grouping along the lines of the G7 and nothing more,” said a German official. “This will be reflected in the progress reports to Luxembourg.”

For its part, the Commission is demanding that it should retain rights of policy initiative within the mini-council. As long as these ground rules are established, Economics Commissioner Yves-Thibault de Silguy is happy to allow the club to coordinate whatever policies it will, from the elimination of tax frontiers to reforms in employment law.