| The Euro
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| (a) | Stage Three of EMU commenced despite the prevailing financial and economic conditions, and the euro was introduced smoothly (paragraph 5).
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| (b) | While cyclical differences in the euro-area and the US were, in the view of witnesses, a plausible explanation for at least part of the depreciation of the external value of the euro against the US dollar, it is difficult to ascribe any particular weight to this or any of the other factors cited by witnesses (paragraph 12). Some witnesses predicted that the external value of the euro would appreciate in due course (paragraph 14).
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| European Central Bank
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| (c) | The structure of the ECB Governing Council could be an important issue if and when more countries join Stage Three of EMU; and this is something to which we will return (paragraph 16).
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| (d) | In the first eighteen months of Stage Three of EMU, euro-area inflation remained relatively stable, an achievement for which the ECB can take some credit, though we note rising inflation in both Ireland and Spain. However, there exists a broad consensus that the ECB's communications with the financial markets and the presentation of its policy actions could be improved. While the differences between the structure of the ECB and the Monetary Policy Committee (MPC) of the Bank of England might mean that it is unrealistic to expect the ECB to adopt the same procedures as used by the MPC to enhance transparency, scope exists to improve the presentation of information by the ECB and the transparency of its operations (paragraph 21).
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| Euro-area Economy
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| (e) | There are some indications that the commencement of Stage Three of EMU has been accompanied by some structural reform in the euro-area. We agree with the Treasury, who said that the pace of structural reform in the euro-area should be "at least maintained and possibly accelerated" (paragraph 26).
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| (f) | There is clearly a potential for conflict between ECOFIN and the euro-area group. Although the formal role of ECOFIN is clear, the euro-area group may increasingly shape the economic agenda. The British Government will need to ensure that, while the UK remains outside EMU, the euro-area group does not usurp the role of ECOFIN in shaping economic policy (paragraph 29).
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| Enlargement of the Euro-area
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| (g) | It is vital that the economic criteria used to assess whether countries should participate in Stage Three are fully respected for all applicants, including those which are deemed too small to have significant effects on the euro-area economy (paragraph 32).
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| The Euro and the UK
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| (h) | There is broad agreement that the UK meets all of the Maastricht criteria, bar that of exchange rate stability (paragraph 33).
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| (i) | Our witnesses agreed that sustainable convergence is the most critical of the five tests and that it should be more than a short-term cyclical coincidence, though, as some witnesses argued, entry itself might bring the economies of the UK and the euro-area closer together (paragraph 38).
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| (j) | It is too early to be certain whether foreign firms are being deterred from undertaking new investment projects in the UK as a result of the UK's decision not to participate in the launch of Stage Three of EMU, although it would be wrong to be complacent (paragraph 41).
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| (k) | Witnesses from the financial services sector were united in the opinion that they, and, in particular, the City of London as a global financial centre, have not yet been adversely affected by the UK's decision not to participate in Stage Three of EMU from the outset (paragraph 42).
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| Preparations for the Euro
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| (l) | Those UK businesses which needed to be ready for the launch of the euro in 1999 were, by and large, prepared (paragraph 44).
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| (m) | There is a sharp division between a small number of predominantly City and multinational UK firms which are already using the euro in aspects of their business activities, and the vast majority of firms, consumers and public sector bodies which have had little or no contact with the euro (paragraph 45).
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| (n) | It is clear that many small- and medium-sized firms are waiting for the Government to decide before preparing for possible UK membership of the single currency (paragraph 49).
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| (o) | It is noticeable that the Second Outline National Changeover Plan focuses on the preparations which the public sector could undertake for possible UK membership of Stage Three of EMU, rather than on private sector preparations, which were a focus of the first Plan (paragraph 50).
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