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Should deficit rules be relaxed? - EMUbusiness - Issue 25

EMUbusiness - Issue 25
22 August 2001
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EMUbusiness top stories

1. Banknote security features to be unveiled
2. Euro Info Centres to help raise euro note and coin awareness
3. Belgian construction and retail sectors could do better
4. Austrians will find it particularly hard to give up schilling
5. National rules and institutions are bar to sound fiscal policy

Publisher's Note
Debate is currently raging as to whether the eurozone's budget deficit rules should be relaxed, or even modified, with contradictory reports followed most frequently by denials that changes to the rules which would suit Germany and France in particular are in the air.

Eurozone Finance Ministers are on the horns of a dilemma. If they conduct debate about possible shortcomings in the Stability and Growth Pact behind closed doors, they will be accused of lack of transparency. If they conduct the debate through the media, the financial markets' already dubious faith in the euro could be shaken still further. This is the last thing the euro needs in the run-up to the introduction of the cash euro.

Over time, it may well be that the eurozone will want to revisit the Stability and Growth Pact. The message Ministers should be trying to communicate now, however, is that it is not such a straitjacket as some people appear to believe. Its authors knew full well that economies go through good times and bad and built in flexibility accordingly. It is very dangerous for some Ministers not to be making clear when they want to make use of that flexibility and when they want to make actual changes.
They are creating the impression that they want to throw the Pact out of the window the first time the going gets a bit rought. That is surely bad policy, and this is not the time.

Marion Bywater
Publisher, EMUbusiness

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1. Banknote security features to be unveiled
Details of the security features of euro banknotes will be
unveiled by the European Central Bank on August 30. The ECB will spearhead a major information campaign over the next four months to raise awareness of the importance of being able to recognise true euro notes from counterfeits. In the meantime, the number of legacy currency counterfeit notes in circulation is on the increase.
Full story:

2. Euro Info Centres to help raise euro note and coin awareness
Retailers and other cash handling businesses, and in particular the smaller and medium-sized businesses among them, are expected to be the primary beneficiaries of a new partnership between the European Commission's Euro Info Centres (EICs) and the European Central Bank. The network of 282 EICs in early August joined the European Central Bank Euro 2002 Information Campaign, which is using designated Euro Partner organisations as information
Full story:

3. Belgian construction and retail sectors could do better
Surveys of business preparedness for the euro generally show that Belgian business is amongst the best prepared, but its construction and retail sectors in particular could still do better according to the latest survey by the Belgian National Bank (BNB).
Full story:

4. Austrians will find it particularly hard to give up schilling
It will not be easy for Austrians to adopt a fundamentally
positive attitude to the euro, and recent exchange rate
developments have not helped, Austria's Humaninstitut, a socio-economic research institute, has concluded following a recent survey of Austrian attitudes to the euro. Currencies are symbol and metaphor for a society's values and it will be hard for Austrians to dissociate the two, the Humaninstitut suggests.
Full story:

5. National rules and institutions are bar to sound fiscal policy
The frequent emphasis on the importance of labour market reforms to unlock the euro area's full growth potential should not be allowed to overshadow the fact that national rules and institutions also need reforming, the European Central Bank suggests in its latest Bulletin. While EU-wide rules and institutions are supportive of stability-oriented and sustainable fiscal policies and thereby foster growth, national fiscal policies are not as efficient as they could be. As long as there is no comprehensive reform at national level, there will be no reversal of the growing gap of the last two decades between U.S. and euro-area growth.
Full story:

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.

Coming up in the September issue of Euro-impact: Italy worries that its information efforts are failing; how EMU will affect wage formation and negotiations; unions still not happy that their concerns are being heeded; banks react angrily to proposals to regulate cost of low-value payments; ECB says Bundesbank independence is threatened; Belgium plans standards on use of euro symbol. Issues of this monthly newsletter on the impact of the euro can be downloaded for GBP 55 + VAT. . For subscription
information .

Other stories on EUbusiness in August

Industrial production up by 0.6% in euro-zone
Seasonally-adjusted industrial production increased by 0.6% in the euro-zone in June compared to May, said Eurostat on 20 August. The rise follows falls in production for the previous two months. Production in the complete 15-nation EU also rose in June, by 0.7%, after a fall of 0.4% in May and of 0.9% in April.
Full story:

Fall in EU inflation
Euro-zone annual inflation fell from 3.0% in June to 2.8% in July, according to figures just released by Eurostat. Inflation in the whole 15-nation EU also fell from 2.8% in June to 2.6% in July.
Full story:

Britain to begin assessment of euro-entry criteria: press
Britain's finance minister has ordered the Treasury to begin assessing his five economic tests for adopting the euro, a move that will prompt speculation of an impending referendum on the controversial issue, the Daily Telegraph reported on 15 August.
Full story:

Criminal world gearing up for the euro, warns police intelligence
Money-launderers, forgers and other criminal groups are gearing up to exploit the launch of the euro next year, the UK's police intelligence agency has warned. The euro changeover provides an outstanding opportunity for organised crime, according to the National Criminal Intelligence Service (NCIS).
Full story:

ECB sees "increased uncertainty" in euro-area growth outlook
The European Central Bank says that euro-zone growth in the
first half of the current year was likely to be weaker than
expected and there was "increased uncertainty" surrounding
growth in the second half.
Full story:

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:

Internet Monitor

Euro equity market study
An analysis of developments last year in the money, bond and equity markets of the euro area can be downloaded from the European Central Bank's site at

Preparing for the euro
Help from the Commission's Enterprise DG for companies trying to ready themselves for use of the euro.

EMU diary
27 August, Economic and Monetary Affairs Committee, European
21-23 September, Informal Eurogroup/ECOFIN Council, Liege
16 October, ECOFIN Council, Luxembourg
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