Jacques Santer, the President of the European Commission,
argues that the political will for EMU is as strong as ever
German Chancellor Helmut Kohl has said that the decision to go ahead with EMU is the choice between war and peace in Europe in the next century. Do you share this view?
EMU is an economic and political necessity for Europe and the vital complement to the single market. The process of European integration has created an unprecedented period of peace and prosperity since the last war ripped our continent apart. Failure to meet the 1 January 1999 deadline for the start of monetary union would be a significant setback, not only because we would lose the economic benefits of the euro, but also in a wider political sense for the EU as a whole.
Do you believe that the timetable for EMU is achievable?
Yes, absolutely. I have no doubt that a significant number of countries will meet the necessary conditions to participate in monetary union from 1999. The political will of the member states is impressive: Europe's leaders have repeatedly and unanimously underlined their determination to respect strictly the Maastricht Treaty timetable and the other EMU provisions.
Member states are also making good progress with convergence, that is ensuring that they are ready for monetary union in economic terms. Inflation and interest rates are at historically low levels. Even in the most difficult area - cutting excessive public deficits - the European average has fallen from 6.3 per cent of GDP in 1993 to 4.7 per cent in 1995. About the same extra effort is needed for member states to get down to 3 per cent by 1997. So the target is well within reach.
How do you respond to the timetable's critics, notably some British politicians?
The Treaty timetable is both realistic and achievable. There may be some people who would prefer EMU to be delayed for political or even financial reasons. Some British politicians may feel more comfortable if they could delay the moment when they are asked whether they want to move ahead with the other member states or whether they want to be left behind.
However, to delay the deadline would mean changing the Treaty, with all the associated procedures of negotiation and ratification. In my view, this would be highly dangerous: there would be no guarantee of recovering the delicate equilibrium that is the result of months of difficult negotiations before Maastricht. Once the lid was off the Pandora's box we might never get it back on. So I strongly recommend against this approach, which could have very serious consequences for the whole process of European integration.
Is it possible to separate the political and economic aspects of monetary union?
It is important for the debate to strike a balance between the important political and economic questions at stake. It would not be healthy for political issues such as national sovereignty to become so dominant that people lose sight of the economic benefits of a single currency. Equally, it would not be possible for economic issues alone to determine the introduction of the single currency which, after all, will have a profound impact on the daily lives of all Europe's citizens.
For most countries, of course, the decision to move to a single currency was taken with the signature and ratification of the Maastricht Treaty. However, the UK still has to make up its mind and I am sure that the British government and parliament will take all factors, both economic and political, into account.
<How do you respond to popular hostility, both towards the concept of union, and the austerity measures needed to ensure that it comes about?
We clearly face a huge communication challenge to explain the concrete benefits of the euro to Europe's citizens, and to reassure them about how it will be introduced in practice.
One of the most common misunderstandings is that EMU imposes intolerable austerity measures on member states. This is nonsense. Independently of the single currency, countries have no alternative to reducing excessive levels of borrowing. The free movement of capital today means that the markets immediately sanction countries with irresponsible budgetary policies. The result is a risk premium on interest rates which hampers investment and therefore acts as a brake on growth and employment.
The only way to ensure sustainable growth and job creation therefore is to maintain a credible policy of deficit reduction. Member states have understood this and are working with determination to eliminate their budget deficits.
Is there any scope for relaxing the criteria for convergence?
A strict application of the convergence criteria is vital for the success of monetary union. Unless participating member states have a successful record of low inflation and controlled public finances, the euro will not have the sound economic basis needed to ensure that it is at least as strong and stable as the best performing existing national currencies.
It will be for the European Council to decide, as soon as possible in 1998, which countries meet the necessary conditions for participation in monetary union on the basis of reports from the Commission and the European Monetary Institute (EMI) on the degree of economic convergence achieved and after the European Parliament has given its opinion.
Would you be prepared to go ahead with EMU if only a handful of so-called 'core' countries had met the criteria for inclusion?
In strictly legal terms, there is no minimum number of countries required by the Treaty for monetary union to begin. However, there clearly needs to be a critical mass at the start for the move to be credible politically. In circumstances where such a critical mass was not attained, it would be for member states to take appropriate action. However, it is not for the Commission, as guardian of the Treaty, to speculate about what would happen if its objectives were not realised.
In any event, I do not believe that this situation will arise. On the contrary, the Commission is confident that a significant number of countries will be ready to participate in monetary union from 1 January 1999.
But assuming that the situation did arise, where would that leave the non-EMU countries?
All member countries are committed to joining the single currency as soon as they are able to meet the necessary conditions (except for the two countries, the UK and Denmark, which have a possible opt-out). This means that countries which do not participate from the start will continue to work towards joining as soon as possible.
In the meantime, there will need to be appropriate exchange rate arrangements to ensure that the Union is not split in two. These will be designed to help the process of convergence for the 'outs' and to ensure sufficient exchange rate stability for the smooth operation of the internal market. To achieve this, there needs to be reinforced economic co-ordination procedures which would underpin the credibility of a new exchange rate mechanism based around the euro.
To Top To Archive IndexTo Contents
©Kensington Publications 1996