EMUbusiness issue 3 - Duisenberg: no justification for higher wages

EMUbusiness top stories
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1. Higher prices no justification for higher wages, Duisenberg says
2. Concerns about low level of preparation for euro
3. Danish EMU referendum too close to call
4. Is the euro a success? Conflicting views
5. The drivers of financial market integration in Europe

Publisher's Note
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EMU is taking a knock from higher oil prices which could hardly have come at a worse time. As the euro-area countries are more vulnerable to oil prices than, for example, the U.K. or the U.S., the battered euro has taken a further beating. The fundamentals of the European
economy otherwise remain good. However, the European Central Bank had little choice but to step in with a further 0.25 percentage point rise in interest rates in late August in order to ensure that the short-term inflationary pressures do not turn into medium-term
inflationary expectations which would jeopardise long-term price stability. In the meantime, the Bank hopes that inflation has peaked at 2.4 per cent and will by no later than next spring be back below 2 per cent.

That presupposes that the oil price drops more than it has so far and that OPEC countries are willing to increase production by more than they have done so far. A call for them not to jeopardise economic growth issued by EU Finance Ministers in Versailles on September 10 appears to have fallen on at least partially deaf ears. Just as the
financial markets were unimpressed by the euro area Finance
Ministers' reaffirmation the day before of their belief in the euro and their belief that the euro has all the characteristics which should make it a stronger currency vis-a-vis the dollar than it is today. However, as ECB President, Wim Duisenberg, pointed out to the European Parliament's Economic and Monetary Affairs Committee on
September 13, it often takes time for markets to catch up with fundamentals when they overshoot the natural exchange rate. In addition, the euro will be at a handicap for as long as there is an exchange rate differential between the euro area and the U.S., particularly as long as the U.S. economy shows no signs of cooling and the 'new economy' shows no sign of taking hold in Europe.

Regards,
Marion Bywater
Publisher, EMUbusiness
mailto:mbywater@eubusiness.com

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1. Higher prices no justification for higher wages, Duisenberg says
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Against the background of continuing weakness of the euro which is exacerbating the impact on prices of the higher cost of oil, European Central Bank (ECB) President, Wim Duisenberg, warned September 12 of the dangers of setting off a wage-price spiral. In his view, all the parties concerned must accept the reduction in real income which is
resulting from higher prices (including higher prices of imports are than oil) as inevitable. The robust economic growth which the EU is currently experiencing, and which should be more than 3% not just this year, but for the next two years as well, would otherwise be jeopardised. So would falling unemployment.
http://www.eubusiness.com/item/26361

2. Concerns about low level of preparation for euro
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The low level of preparations for the euro, especially among small and medium-sized enterprises, should be a cause for concern according to Noel Hepworth, Euro Project Director of FEE, the European Accountants' Federation. Presenting evidence to the Economic and Monetary Affairs Committee of the European Parliament this month, he
warned of the risks to organisations of not being ready on 1 January 2002 and of lack of understanding by business of the deadlines and other requirements.
http://www.eubusiness.com/item/26362

3. Danish EMU referendum too close to call
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An early September swing in Danish polls back towards the idea of joining Economic and Monetary Union and adopting the euro has faltered with a Gallup poll showing a five-point gap (45% to 40%) in favour of staying out. A further weakening of the euro on foreign exchange markets appears to be influencing thinking on how to vote in the September 28 referendum.
http://www.eubusiness.com/item/25053

4. Is the euro a success? Conflicting views
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Is it merely politically correct to claim the euro is a success, or do the advantages outweigh the fact that it is a weak currency? The former, argues Professor Dr. Wilhelm Hankel, in Die Bank, the magazine of the German commercial bankers' association, Bundesverband Deutscher Banken. Not so, retorts Dr. Hans-Joachim Massenberg, the association's Executive Director.
http://www.eubusiness.com/item/26364

5. The drivers of financial market integration in Europe
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Debate about how many securities trading markets are needed are particularly topical in a single currency area. This is currently no more so than in the euro area, though financial market integration in Europe will always be wider than just the EMU area. The merger of the Paris, Brussels and Amsterdam exchanges to form Euronext, which is now getting under way, would not have moved as fast (if at all)
had there not been a euro. In parallel, settlement and clearing systems are merging apace. Euroclear this month announced the first step to full merger with the Belgian and Dutch clearing and settlement houses. It had previously merged with France's Sicovam. These developments are coinciding with the drive by markets and
traders to cut costs as technology revolutionises securities markets.
http://www.eubusiness.com/item//26366

Other stories on EUbusiness in September
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Euro's record dive, despite rate hike
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The euro has continued its downward slump on currency markets, despite the Ecofin ministers' meeting last Friday, and despite last week's quarter per cent rate rise by the European Central Bank (ECB). On 6 September, the currency sank to new all-time lows against the dollar and the yen of 86.87 cents and 91.85 yen.
http://www.eubusiness.com/finance/

ECB demands better data
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The European Central Bank complained that a poor quality of national statistical data made its job of managing the euro much harder. The ECB, meeting in early August, warned that the statistical problem was serious and that EU citizens in the euro-zone might pay a high price for any errors made caused by poor data.
http://www.eubusiness.com/finance/

June retail trade up 1.8% in euro-zone
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The volume of retail trade gained 1.8% in the euro-zone and 2.2% in the EU15 in June, according to latest Eurostat estimates. Compared to May, sales decreased by 0.4% in the euro-zone and by 0.3% in the EU15. Retail trade rose strongly in Ireland (10.0%) and Sweden (8.9%), but fell in Italy (-2.4%) and Denmark (-3.4%).
http://www.eubusiness.com/factsfig/

Brussels approves Cofunds electronic 'supermarket'
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Plans by subsidiaries of Commerzbank, Prudential Plc, US Nationwide Mutual Insurance Company and Zurich Financial Services to create an electronic 'supermarket' selling retail mutual funds via independent intermediaries, have been approved by the Commission.
http://www.eubusiness.com/competit/

Euro-zone jobless unchanged at 9.1% in July
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Euro-zone seasonally-adjusted unemployment remained unchanged in July at 9.1 per cent, according to latest Eurostat figures. The EU15 rate fell to 8.3 per cent in July from 8.4 per cent in June.
http://www.eubusiness.com/employ/

EUR 1.5 billion euro-zone external trade surplus
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First estimates for euro-zone trade with the rest of the world in June show a 1.5 billion euro surplus compared with EUR 8.4 billion surplus in June 1999, according to Eurostat.
http://www.eubusiness.com/trade/

Internet Monitor
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E-security conference
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The second ISSE (Information security solutions Europe) conference organised by EEMA (the European forum for electronic business) will address the issue of electronic information security in Barcelona from 27 to 29 of September. Ministers from several European and North
American governments will attend the event, organised under the auspices of the Commission's Information Society DG. (Cordis News)
http://www.eema.org/isse

Taxation and Customs Union
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The Commission manages several databases in conjunction with Member States' Customs and Taxation Services. The databases include BTI - Binding Tariff Information on CD-ROM, ECICS - European Customs Inventory of Chemical Substances, QUOTA - Tariff quotas and ceilings and TARIC - Integrated Community Tariff. In many languages.
http://europa.eu.int/comm/taxation_customs/databases/database.htm

ECB seasonal adjustment report
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The European Central Bank has released a paper entitled publication entitled "Seasonal adjustment of monetary aggregates and Consumer Price Indices (HICP) for the euro area". It is a 881 Kb download and is in PDF format.
http://www.ecb.int/stats/press/pr0008sama.htm

Taxation and Customs Union
--------------------------
The Commission manages several databases in conjunction with Member States' Customs and Taxation Services. The databases include BTI - Binding Tariff Information on CD-ROM, ECICS - European Customs Inventory of Chemical Substances, QUOTA - Tariff quotas and ceilings and TARIC - Integrated Community Tariff. In many languages.
http://europa.eu.int/comm/taxation_customs/databases/database.htm

Euro Paper No 41
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Practical aspects of the euro. State of play and tasks ahead. PDF file.
http://europa.eu.int/comm/economy_finance/document/europap/eup41en.pdf

Euro Paper No 39
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What would happen to a company on 1 January 2002 that had not converted to the euro? Advice to managers and their advisers. A major advice and communications project by the European accountancy profession lead by the Federation des Experts Comptables Europeens, (FEE), with the support of the Commission, to help organisations prepare for the introduction of the euro.
http://europa.eu.int/comm/economy_finance/document/europap/eup39en.pdf

EU diary
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European Parliament session, 4-8 September, Strasbourg
Informal ECOFIN Council, 9-10 September, Versailles

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Community
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Any Answers?
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* Lars F. Lier wants to know as much as possible about the marketing implications for a company outside the EU doing business with an EU-country when we are talking about export/import.

* Tim D. Wilkie is looking for EU member State GDP figures

* Frederic Cohen is looking for the Type / Amount of duties in tobacco products per countries as well as the related legislation for tobacco trading in and out of the European Union.

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