EU man faces sack for book on currency `con'
Tuesday 05 September 1995
A British economist is facing the sack from the European Commission for writing a book that denounces the planned single European currency as a "confidence-trick". A Commission spokesman said yesterday that Bernard Connolly had violated Commission rules by not asking for permission to publish his book, entitled The Rotten Heart of Europe: The Dirty War for Europe's Money.
Mr Connolly, who is on leave from the Commission, is a middle-ranking official with responsibility for monetary matters.
Colleagues said his scepticism about monetary union had been an open secret in Brussels for a long time.
The affair is embarrassing for the Commission, partly because it illustrates that the single-currency project is capable of provoking severe differences of opinion in the European Union's executive branch.
Mr Connolly's views carry some weight, because he joined the Commission as long ago as 1978, one year before the creation of the Exchange Rate Mechanism, the EU's system of semi-fixed exchange rates.
He contends in his book that the ERM is an arrangement run primarily for the benefit of France and Germany, and says Britain's membership of the ERM from 1990 to 1992 was a catastrophe.
His book is likely to be required reading for the Thatcherite, Europhobic wing of the Conservative Party.
Mr Connolly says that a single currency would not only destabilise European economies, but increase political tension across the continent. "Monetary union would reduce political legitimacy in every country in Europe and in Europe as a whole. It would increase economic instability in every country in Europe, and in Europe as a whole," he said yesterday.
The Connolly affair erupted only two days after the Governor of the Bank of England, Eddie George, voiced grave doubts about the single-currency project. Speaking in the Norwegian town of Skien, south of Oslo, he said it was far from clear that countries participating in monetary union would be able to adhere indefinitely to the strict convergence criteria stipulated in the Maastricht treaty.
"It is not enough just to meet the convergence criteria at a particular moment in time. The crucial question is whether we will be able to be at all confident that convergence will in fact be sustainable, if at the same time we are confronted by very high levels of unemployment and by widely differing national unemployment levels among the larger countries," he said.
The Maastricht treaty sets out a number of conditions for countries forming a monetary union, including prolonged currency stability, low inflation and interest rates, and upper limits on public debts and government budget deficits. Like Mr George, some economists are concerned that, although various countries may meet these conditions in a period of economic expansion, they may find it impossible to stick to the criteria when the business cycle turns down without inflicting severe damage on their economies.
Despite such fears, the EU shows no sign of relenting on the single-currency project, which is due to be launched in 1999, even though no name has yet been chosen.
EU central- bank chiefs are discussing a blueprint for introducing the single currency today in Frankfurt, where the future European central bank will be located.
One of the most contentious issues concerns the relationship between currencies that form a monetary union and currencies that stay outside. Some EU officials say countries such as Britain, Greece, Italy, Portugal and Spain, which are unlikely to take part in monetary union in 1999, should not have the right to let their currencies float freely against the single currency because this could give them an unfair competitive advantage.
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