Monday

26th Aug 2019

Duisenberg bids farewell

  • WIM DUISENBERG said that a country like Sweden would marginalise itself both economically and politically if it stayed outside the euro zone (Photo: European Commission)

As he made his farewell speech in the European parliament yesterday afternoon (10 September), the European Central Bank President Wim Duisenberg criticised countries like France and Germany for being unable to keep their deficit lower than the 3% of GDP (Gross Domestic Product) set out in the Stability and Growth Pact.

He said the reason that these countries are facing a high deficit now is because they did not bring their economies to sustainable levels during times of strong economic growth.

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"There is growing evidence that most countries will miss their budgetary targets for 2003 by a significant margin", Mr Duisenberg said.

France and Germany are set to breach the Stability and Growth Pact this year - France is also expected to miss the target next year - and risk facing fines of up to 0.5 percent of GDP.

Mr Duisenberg is also concerned about the discussions surrounding the Stability and Growth Pact and reiterated that the rules of the game should not be changed.

"Countries not complying with the pact want to change the rules of the game. Those at the offside should expect to get a free kick against them", Mr Duisenberg said.

Commission President Romano Prodi had a telephone conversation yesterday afternoon with French Prime Minister Jean-Pierre Raffarin, were he expressed his preoccupation with recent press statements on the forthcoming French budget.

He conveyed his personal wish that a solution is found within the rules of the Treaty and the Stability and Growth Pact.

Urging yes in Sweden

Although Mr Duisenberg did not want to involve himself in the euro referendum in Sweden, he said that a country outside the euro zone would be marginalising itself both economically and politically.

He also said that it would be exposing its industry sector to exchange rate fluctuations and thereby increasing uncertainty.

However, as the referendum day in Sweden nears, the European Commission admitted that the growth forecast for this year would be lower than expected, 0.5% instead of the 1% previously forecast.

Trichet's hearing

Replacing Mr Duisenberg when the post becomes vacant on 1 November this year, is likely to be the Frenchman Jean-Claude Trichet, who was recommended by the 15 EU finance ministers.

He will appear this morning in front of the Economic Affairs Committee of the European Parliament where he is expected to face tough and critical questions by euro-parliamentarians.

Although the European Parliament has to be consulted on the appointment of any new member of the Executive Board of the ECB, it has no final right of veto.

According to the Committee chair, German Socialist Christa Randzio-Plath, the likelihood that Mr Trichet's competence is questioned is not very big.

"The situation is always open", she said "however he is not an unknown person".

Economic outlook worse than expected

The European Commission has had to revise its economic forecast for this year. Policymakers now say that the euro zone will only grow by about 0.5 percent, rather than the 1 percent they had originally envisaged.

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