One Last Swipe for Good Luck

Well, while we're in the business of farewells, we shouldn't miss the opportunity to say goodbye to dear old Duisy. We shall miss him, especially his special talent for putting both of his feet in it simultaneously. Now he's saying that the foundations of economic and monetary union may be in danger. Of course I agree but for different reasons, structural ones associated with the very idea of the euro itself. On the other hand, I can't say I am exactly inspired by the imminent arrival of his replacement, but then, time will tell.

European Central Bank president Wim Duisenberg yesterday signed off his five-and-a-half year term with an attack on the eurozone countries that have failed to contain their budget deficits. He said the ECB had serious concerns about the situation and warned it could damage the foundations of economic and monetary union.

In his last press conference before he stands down at the end of the month, Mr Duisenberg said: "There is growing evidence that most countries will miss their budgetary targets for 2003 by a significant margin and, in a number of cases, budgetary plans for 2004 are not reassuring." He acknowledged that lower than expected growth was partly to blame. But he added: "It is worrying to see that not all countries with severe imbalances have so far introduced sufficient consolidation measures. It is fundamental that the credibility of the in stitutional underpinnings of EMU be maintained."

Mr Duisenberg defended the stability and growth pact under which governments are supposed to keep their deficits below 3% of gross domestic product but countries such as France and Germany have breached it once and look likely to breach again. Shrugging off criticism the pact was too rigid to cope with the problems thrown up by stuttering economies and rising unemployment, Mr Duisenberg insisted it provided "an appropriate framework for maintaining fiscal discipline within adequate bounds of flexibility". The real problem was the need for structural reform of the eurozone's markets for goods and services to address "the main economic problem of the euro area, namely the high level of structural unemployment". Mr Duisenberg, who will be succeeded by Jean-Claude Trichet, governor of the Bank of France, is signing off with the euro at almost exactly the same level at which it launched in 1999 and with inflation at 2.1% - just above the 2% ceiling that the bank sees as consistent with price stability. Yesterday Mr Duisenberg said the ECB had decided to leave interest rates on hold at 2%. He said the bank expected price pressures within the eurozone to stay subdued and the medium-term outlook for price stability remained "favourable".
Source: The Guardian
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