THE GREAT EMU DEBATE: A user's guide to the single European currency
Tonight Kenneth Clarke spells out the Government's criteria for a singl e European currency
Thursday 09 February 1995
Actually, the Romans'. In its most recent incarnation Jacques Delors, the former President of the European Commission, is responsible. He relaunched the idea in a report in 1989, which was turned into policy by the Maastricht treaty of 1991. It set up a three-stage process. Stage three - a single currency - is due by the end of the century.
What's the point?
Proponents say it would save on the costs of changing money, stabilise inflation and give Europe the financial clout needed to turn it into a global economic power. They argue that a single currency is necessary to match a single market. France is especially keen: it fears that without a single currency, Germany will effectively set monetary policy on its own.
Where's the catch?
Opponents say that if the Government loses control of the currency, it loses control of sovereignty; Europe's economies are too diverse for the scheme to work. They also fear that the policies needed to create a single currency would lead to higher unemployment.
So who's in favour?
Germany, France, Belgium, the Netherlands, Luxembourg, Austria and Ireland are the frontrunners. Aspirant countries must have low inflation, stable currencies, and low debt and deficits, which limits applicants somewhat. Britain and Denmark are both sceptical and have opt-outs.
And how will it happen?
The countries that go ahead will first lock their exchange rates. An independent European central bank, to replace national banks, will follow. Finally, a single currency replaces all national currencies.
What will it look like?
There is no reason why we couldn't have different designs: the Queen's head may survive. It is usually assumed that the currency will be called the ecu, but that's just an abbreviation for European Currency Unit. The Germans might want it to be called something else - like the Euro-mark. We wouldn't.
When will it happen?
The first try is next year. If a majority of countries meet specified economic targets, they could go ahead in 1997. If not, the EU will try again for 1999. A "honeymoon" period of months or years would follow, when national currencies and the ecu co-exist. Then there would be a switch to a true single currency.
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