WRITTEN QUESTION E-3208/00

by Erik Meijer (GUE/NGL) to the Commission

(17 October 2000)

Subject: The value of national currencies in the EU Member States following the rejection of the euro by the Danish electorate on 28 September 2000

1. In the light, inter alia, of the result of the Danish referendum and of opinion polls in other States, it would appear that the replacement of national currencies by the euro meets with least opposition in Member States and applicant countries which had a weak currency in the preceding period, and with most opposition in Member States which had a strong currency at the outset. One factor that may weaken the new currency is the fact that the populations of other Member States have not yet had the opportunity to state their views. Is the Commission prepared to require that the populations of these Member States be given the opportunity to express their opinion as to the desirability of the euro being introduced and participation in this process by their countries, with a view to establishing reliably how viable a single European currency is?

2. Since the exchange rate was fixed at the end of 1998, the value of the euro has fallen by 25 %, leaving it not only below the value of the US dollar, but also weakened vis-à-vis the national currencies of those EU Member States which have not so far committed themselves to membership of European Monetary Union. This means that there is a psychological sense of defeat which may be self-perpetuating, as well as a need to produce more banknotes and coins to represent any given value. Is the Commission if the attempt to introduce a single currency is continued prepared to initiate steps to fix the value of the euro, well in advance of the planned introduction date of 1 January 2002, at a level much higher than (for example, twice as high as) the value assigned to it in 1998, so that this value remains lastingly higher than that of the British pound or the US dollar, and the number of the soon to be needed coins and banknotes is halved?

3. What other possible ways does the Commission see of ensuring in the short term that the exchange value of the national currencies in the European Union Member States is brought into line with the strength of their economies?

Answer given by Mr Solbes Mira on behalf of the Commission

(20 November 2000)

1. Although public opinion regarding European integration and the adoption of the euro is regularly assessed through the Eurobarometer surveys, the EC Treaty does not require that a Member State should hold a referendum before deciding whether or not to adopt the euro, nor does the Commission propose to introduce such a requirement. The issue of whether or not a referendum should be held before a Member State adopts the euro is a matter for individual Member States. In any event, it should be noted that only Denmark and the United Kingdom have opt-out clauses as far as membership of the euro is concerned. Sweden, on the other hand, does not have an opt-out clause and will be required to adopt the euro once it has met the convergence criteria. As far as the candidate countries for accession are concerned, none of them has requested an opt-out clause for membership of the euro. Upon joining the Union, these countries will be considered as countries with a derogation.

2. There is widespread agreement that the euro is currently undervalued on foreign exchange markets and that it has substantial scope to appreciate over the medium term. Nevertheless, under a floating exchange rate regime, the short-term value of a currency is primarily determined by expectations in foreign exchange markets. It would therefore not be appropriate to fix the external value of the currency, nor does the Commission have any plans to do so.

3. The Commission itself does not have any instruments to affect the short-term value of the euro. However, as far as economic fundamentals are concerned, there are a number of factors which should tend to encourage an appreciation of the euro over the medium-term. Firstly, growth in the euro area is strong and core inflation is low. Secondly, there has been a significant amount of progress in fiscal consolidation by Member States. Thirdly, structural reforms have improved (and will continue to improve) the supply side in the euro area economy.

Although intervention in markets can, under certain circumstances, be a useful tool at the disposal of policy makers, it is above all essential that macroeconomic policy both in the euro area and in other major economies remains on a sound footing. The Commission has emphasized the principles of stability oriented policies in its broad economic policy guidelines and it will continue to do so.