WRITTEN QUESTION E-2256/00 by Theresa Villiers (PPE-DE) to the Commission. Action to support the euro.
Date: 2000-07-04
Institutions: European Parliament, Provisional data
Subjects: euro, exchange-rate mechanism

20.3.2001

EN

Official Journal of the European Communities

C 89 E/169

The Commission cannot in any case award any claims for damages. Such claims can potentially be made
in national courts or other national instances, in accordance with national procedural rules.

(2001/C 89 E/191)

WRITTEN QUESTION E-2256/00

by Theresa Villiers (PPE-DE) to the Commission

(4 July 2000)

Subject: Action to support the euro

Following the Ecofin meeting of 8 May 2000, the French Finance Minister, Laurent Fabius, commented
that (cid:145)concrete action(cid:146) could be taken to boost the euro.

It was reported that the Finance Ministers agreed that an (cid:145)instrument of intervention exists, and is
available(cid:146), referring to the reserves of the European System of Central Banks.

Could the Commission indicate which instruments could be invoked to support the euro, the circum-
stances under which they could be invoked, and who would be responsible for taking such a decision?

Answer given by Mr Solbes Mira on behalf of the Commission

(28 July 2000)

Economic policies have an impact on the development of the exchange rate through various channels.
While monetary policy has a direct impact through its interest rate and intervention policies, other
economic policies have an indirect influence as they affect expectations of economic agents.

The European Central Bank (ECB) can modify the attractiveness and profitability of portfolio investments
in euro by changing interest rates. An increase in the main refinancing rate, the main policy instrument of
the ECB, would normally attract capital inflows, thus supporting the exchange rate. Rising interest rates
would also favourably influence inflation expectations, thus underpinning the stability oriented credibility
of the ECB. Another instrument for exchange rate policy is intervention on foreign exchange markets. By
buying the euro on foreign exchange markets against foreign reserves, the ECB would signal to the market
that the exchange rate is undervalued. Unsterilised interventions would reduce liquidity on the domestic
money market and tend to increase interest rates while sterilised interventions would have a demand effect
only. The effect of interventions on the exchange rate would be larger if jointly undertaken by the
respective central banks.

Other economic policies, in particular fiscal and structural policy, have an indirect effect on the exchange
rate. A well balanced fiscal-monetary policy mix would strengthen the exchange rate development in the
medium term. Structural reform and a well-functioning labour market may raise the expected rate of
return thus attracting investment in the euro area.

The EC Treaty distinguishes clearly between the responsibilities for economic policies in the euro area.
While the ECB decides independently about monetary policy, fiscal and structural policies are in the
responsibility of the Member States. Therefore, the ECB decides about interest rates with a view to
safeguard price stability in the euro area. Fiscal policies are decided at the national level with a view to
support monetary policy in its goal of price stability. The stability and growth pact is an effective co-
ordination tool to achieve this objective.

Concerning interventions, the EC Treaty provisions (Articles 105, 111) suggest that the (cid:145)ECB conducts
foreign exchange operations consistent with general orientations formulated by the Council(cid:146). However,
such general orientations are without prejudice to the primary objective of the European system of central
banks (ESCB) to maintain price stability. For the time being, the Council has not formulated such general
orientations.

C 89 E/170

Official Journal of the European Communities

EN

20.3.2001

So far, the ECB has not intervened on foreign exchange markets. As the exchange rate is not a target
variable for the ECB, interactions to support the euro could become necessary only if the exchange rate is
clearly misaligned, threatening the inflation target of the ECB. The ECB disposes of foreign exchange
reserves of € 50 100 million (30 June 2000) which could be used for interventions. The Eurosystem as a
whole has foreign exchange reserves of almost € 390 000 million.

(2001/C 89 E/192)

WRITTEN QUESTION E-2260/00

by Pere Esteve (ELDR) to the Commission

(7 July 2000)

Subject: Liberalisation of the electricity sector

At present various Member States are completing the process of liberalising electricity charges.

liberalisation will have positive
Across the continent as a whole and in mainland Spain in particular,
effects, although this may not be the case in isolated regions such as the Balearic Islands where, because of
their geographical situation, it is not feasible to create a fully liberalised market.

Given the likelihood that in future liberalisation may not have the desired effects in terms of cutting prices,
will the Commission say whether it plans to take any measures to promote full
liberalisation of the
electricity sector in some regions of Europe such as the Balearic Islands where this is not being achieved?

Answer given by Mrs de Palacio on behalf of the Commission

(11 September 2000)

According to the information available to the Commission, the electricity supply system on the Balearic
Islands consists of five power generation plants, three located on Majorca, one on Ibiza and one on
Minorca. The systems of these three islands are not interconnected and none of them is connected to the
grid system of the Spanish peninsula.

Given the (cid:129) due to the geographical situation (cid:129) extremely small size of the Balearic electricity supply
system, it is clear that the positive effects of liberalisation on electricity prices produced by increased
competition cannot materialise to the same extent as in bigger electricity markets. Full liberalisation of
isolated systems may even produce negative effects, such as price increases stemming from monopolistic
or oligopolistic behaviour of the (cid:129) naturally (cid:129) limited number of market players operating in such
systems. Therefore, should the Spanish government consider it inappropriate to liberalise such small
isolated systems, it has the possibility to refer to Article 24(3) of the Directive 96/92/EC of the Parliament
and of
in
electricity (1) and apply for a derogation from the main provisions of the directive whilst at the same
time ensuring appropriate price levels for final consumers through effective regulation of the market.

the Council of 19 December 1996 concerning common rules for the internal market

In general, the Commission is fully aware of the specific situation of islands in connection with energy
supply, as it was discussed recently at
the Azores Conference (cid:145)Energy in the Island Communities(cid:146).
The Commission is currently analysing the situation and is considering possible solutions and measures,
in particular with regard to the promotion of renewable sources of energy, which usually have a
particularly large potential for expansion on islands, which are not connected to national networks.

(1) OJ L 27, 30.1.1997.