Germans get tough as gloom deepens

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The Independent Online
GERMANY yesterday blocked moves to create a powerful new voice for the Euro on the international stage, in discussions overshadowed by new, lower forecasts for economic growth next year, writes Stephen Castle in Vienna.

At an informal meeting of European finance ministers here, Germany made it clear that the European Central Bank alone should speak for the 11- nation Eurozone at meetings of the G7 and International Monetary Fund. It also rejected British and French ideas for an overhaul of the IMF. Gordon Brown, the Chancellor, called for an international finance system to manage the world economy - and said that the search for growth and stability now required a global solution.

Germany had been expected to back French proposals to give the three European nations on G7 which will join the Euro (France, Germany and Italy) the job of speaking for the Eurozone.

That plan has provoked anger from smaller nations worried that their voices would be drowned out. Yesterday Belgium outlined counter-plans to give a seat at meetings of the G7 finance ministers to the president of the Euro-11 group (currently Austria), and a European commissioner. The Euro-11 presidency should also gain a new role on the executive board of the IMF, it argued.

On the eve of national elections, Germany made it clear that it considers current G7 arrangements satisfactory, and thinks consultation between 11 nations, the ECB and the European Commission is impractical.

On plans to reform the IMF, Gunther Rexrodt, German economics minister, said: "We don't need new institutions and we need to keep flexible relations between currencies."

Meanwhile there was a new note of pessimism over economic growth rates in Europe, with the forecast for 1999 being revised down 0.5 per cent to 2.5 by the European Central Bank. The average in the Euro-11 is expected to be lower than predicted at 3 per cent. However the slowing growth rate will help high interest-rate countries which need to cut the cost of borrowing to near the European average by January next year.

See Business, Section 2

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