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The impact of 'peer pressure' - EMUbusiness - Issue 16

27 March 2001, 21:32 CET


EMUbusiness - Issue 16
27 March 2001
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EMUbusiness top stories
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1. Planning for conversion to the euro must be painstaking
2. Bringing the BEPG to the fore
3. Belgian public sector catches up, but is it enough?
4. EMU expansion to east more institutionally than economically difficult
5. Encouraging the use of the euro around the world
6. More news of unreadiness in France

Publisher's Note
================

Frequently, the theory that euro-area states make progress towards greater economic compatibility by means of 'peer pressure' encounters a great deal of scepticism. The occasions when Member States who go their own way or who 'fudge' their results get more publicity than those where they take account in their own actions of what others are doing. Looking back over the last decade, however, as a recent European Commission working paper does, it can be relatively satisfactorily established that 'peer pressure' has had an impact. Of course, in some countries - Belgium and Italy are examples - it is considerably easier than in, say, Germany to sell an economic policy on the grounds that 'Brussels' requires it. Nevertheless, in the aggregate 'peer pressure' seems to be having some desirable effects, and to be welcomed. The results of the Stockholm Summit were another example of this. The conclusions reinforced the commitment to getting the policy mix right for the euro area as a whole, rather than looking at it from a merely national standpoint, and above all they bedded in the agreement that pensions and health care funding must stand up to peer scrutiny. While the wording may look woolly, this was another incremental step in a process which has actually travelled a long way between Maastricht and Stockholm. Above all, despite the signs of adjustment fatigue which the Commission says it is determined to prevent taking hold, it is a process which did not stop once the Maastricht criteria were met.

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

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1. Planning for conversion to the euro must be painstaking
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Planning for conversion to the euro must be painstaking, businesses and their advisers who have been consulted by the European Accountants' Federation (FEE) about experience to date have all stressed. FEE reports that two consistent themes run through the summary of the most difficult issues provided by companies and their advisers. The first is that the opportunities for damaging error are substantial. The second is that there is considerable scope for confusing customers, and therefore damaging a company's customer
relations and even its brand.
Full story: http://www.eubusiness.com/item/42338


2. Bringing the BEPG to the fore
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Academic support for giving the Broad Economic Policy Guidelines a greater role comes in a new paper on Budgetary Consolidation in EMU commissioned by the European Commission from three professors at major economic research institutes. They suggest using the BEPG as a framework for analytical and strategic assessment in order to ensure
that the EMU gets the policy mix right. In particular, they recommend that there be more co-ordination of fiscal policy. They believe that the policy mix of the nineties, when there was for a long time a 'Maastricht effect' was not one that favoured growth. More co-ordination, which is in fact the direction in which the EU is moving, should ensure that a policy mix is achieved which combines
sound public finance with the strongest possible growth.
Full story: http://www.eubusiness.com/item/42344


3. Belgian public sector catches up, but is it enough?
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The Belgian public sector is making up for lost time in planning for conversion of the public sector, but still cannot afford to relax. If recent assessments are correct, time could run out for testing the external interfaces of IT systems. Belgium, along with the Netherlands, is one of the more open governments when it comes to discussing public sector preparations. Both are admitting to problems, though the Dutch expect to make up most of the lost ground in central (as opposed to local) government with only a few problems.
Full story: http://www.eubusiness.com/item/42355


4. EMU expansion to east more institutionally than economically difficult
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Politically, the most difficult challenge from enlarging EMU to include the candidate companies will be to reorganize decision-making within the European Central Bank, leading American economists argue in a recent paper for presentation at a conference on the future of EMU. Economically, the issues are not as major. Their analysis
suggests that the monetary union should be able to accommodate this expansion in economic terms. The problems are institutional.
Full story: http://www.eubusiness.com/item/42357


5. Encouraging the use of the euro around the world
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The introduction of the euro in cash form should be used as an opportunity to increase the use of the euro outside the euro-area, Belgian Finance Minister, Didier Reynders, told the Annual Meeting of the Board of Governors of the Inter-American Development Bank this month.
Full story: http://www.eubusiness.com/item/42358


6. More news of unreadiness in France
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Only 21 per cent of accountants those surveyed recently by EPSY for the French Accountancy Institute (IFEC) said their clients have already prepared for the euro. The businesses themselves take a more positive view. 66.2% say they are already preparing for the deadline, though only 45.9% have done anything concrete.
Full story: http://www.eubusiness.com/item/42359


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These articles are provided by Euro-impact. Euro-impact is a monthly newsletter on the regulatory, practical and strategic impacts of the euro for companies. Articles may be reproduced with acknowledgement of the source and Euro-impact. Every reasonable effort has been made to ensure the information is correct at the time of writing.
http://www.euro-impact.com
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Coming up in euro-impact
Dual price display to be compulsory in Portugal; trade associations to commit to price stability during changeover; pressure builds to frontload consumers with notes; doubts over interpreting Italy's law on share capital re-denomination; Dutch expect to complete cash
changeover in one week; latest consumer survey shows euro-awareness growing but there are still many gaps; Austrian, French, German surveys all confirm business has yet to wake up.

All these items will be covered in the next issue of Euro-impact.
For subscription information http://www.eubusiness.com/finance/euroimpact.html .
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Other stories on EUbusiness in March
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Euro-zone external trade deficit EUR 7.4bn
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The first estimate for euro-zone trade with the rest of the world in January 2001 was a EUR 7.4 billion deficit, compared with EUR - 5.0bn in January 2000, according to latest figures from Eurostat.
Full story: http://www.eubusiness.com/item/42012


Accord in principle reached on harmonization of EU financial markets
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EU economy and finance ministers reached late Thursday a compromise draft accord for harmonizing European financial markets when Germany withdrew its opposition after last minute changes, European sources said.
Full story: http://www.eubusiness.com/item/41965


January industrial production down 1.9% in euro-zone
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Seasonally-adjusted industrial production fell by 1.9% in the euro-zone in January from the figure to December - according to Eurostat, the EU's statistical arm. This follows a rise of 1.7% in December and of 1.1% in November.
Full story: http://www.eubusiness.com/item/41717


Euro-zone annual inflation up to 2.6%
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Annual inflation in the euro-zone rose to 2.6% in February 2001, up 0.2% since the previous month, according to latest Eurostat reports. The rise in inflation means any cut in euro interest rates is likely to be delayed hitting growth prospects for the European economy. The ECB left its key rate unchanged at 4.75% at its management meeting on
15 March.
Full story: http://www.eubusiness.com/item/41261


New monthly high for euro-denominated bonds
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Total issuance of euro-denominated bonds reached a new monthly high in February at EUR 145 billion, according to the Commission's monthly round-up of the bond markets. The report showed a notable change in the composition of issuance in February relative to the previous month and February 2000, with big increases in the corporate and
financial sectors and a moderate fall in the Pfandbriefe sector.
Full story: http://www.eubusiness.com/item/41135

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This newsletter is produced in association with FEE, the Federation des Experts Comptables Europeens. FEE is the representative organisation for the accountancy profession in Europe. It is a "non profit" organisation which groups together 38 professional bodies from 26 countries, including all 15 Member States of the European Union and the 3 main member countries of EFTA.
The FEE Euro Information Service is at: http://www.euro.fee.be
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Internet Monitor
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ECB Monthly Bulletin for March
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The European Central Bank explains why it decided to leave euro interest rates unchanged as it battles to balance the need for European growth and the risks of inflation.
http://www.ecb.int/pub/pdf/mb200103en.pdf


ECB Working Paper 48
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Marcel Fratzscher takes an in-depth look at financial market integration in Europe in this ECB Working Paper (number 48):
http://www.ecb.int/pub/wp/ecbwp048.pdf


Structural reforms 2001
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The Annual Report on Structural Reforms 2001 is prepared by the Economic Policy Committee focuses on progress made in the product, capital and labour markets and long-term public finances.
http://europa.eu.int/comm/economy_finance/epc/countryreviews/2001annualreport_en.pdf


Growth and Employment report
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The Stockholm summit considered this report from the Commission and Ecofin on the contribution of public finances to growth and employment:
http://europa.eu.int/comm/economy_finance/epc/publicfinance_en.pdf


Strategy for the Internal Market
--------------------------------
Internal Market Commissioner Frits Bolkestein outlined the
Commission's current thinking on the forthcoming review of internal market strategy to the European Parliament's Legal Affairs Committee in Brussels on 19 March. A summary of his message can be found at:
http://www.europa.eu.int/comm/internal_market/en/update/strategy/01-99.htm

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