ECONOMIC AND MONETARY UNION
I. INTRODUCTION
1. In Spring 1998 the Committee undertook an inquiry
into aspects of the launch of Stage Three of Economic and Monetary
Union (EMU), including the planned launch of the new single currency,
the euro, which was then still some months away.[2]
The inquiry focussed on the validity of the Chancellor's five
economic tests, which he announced in October 1997 would be used
to "define whether a clear and unambiguous case can be made"
for UK entry to Stage Three of EMU;[3]
the economic consequences of staying outside Stage Three for longer
than the few years envisaged by the Chancellor; the degree of
readiness in the UK for the advent of the single currency, while
the UK remained, at least initially, outside; preparedness for
the possibility of UK entry at a later date; and the handling
of both euro and sterling exchange rate policy in Stage Three.
2. Stage Three of EMU commenced on 1 January 1999
with eleven European Union (EU) Member States, although not the
UK, participating (see paragraph 5). In March 2000 we announced
an inquiry to examine the operation of the first few months of
Stage Three, following up our Report of April 1998. The terms
of reference were to consider:
— monetary conditions
to date, including the value of the euro and its position as an
international reserve currency, and the actions and structure
of the European Central Bank
— the performance and the future prospects
of the euro area economy and the progression of economic convergence
between Member States since the euro's launch
— whether developments in the euro area
economy and the UK economy have made any substantive difference
to an assessment of whether the UK satisfies (i) the Maastricht
convergence criteria and (ii) the Government's "five economic
tests"
— the implications for the euro of enlargement
of the EU
— the National Changeover Plan and the
level of preparation undertaken by (i) UK firms and (ii) the public
sector for possible entry into Stage Three of EMU.
3. One issue we have again chosen not to consider
is whether or not the UK should join Stage Three. We reiterate
our comments of 1998: "Members of the Committee have differing
views as to the intrinsic merits of EMU and we have therefore
decided that it would be unproductive to attempt to reach a view
as to whether the UK should or should not participate in Stage
Three."[4]
We have also chosen not to look in detail at the costs which might
be incurred by businesses and others as a result of a decision
to join Stage Three, an issue which is currently being considered
by the Trade and Industry Committee.[5]
4. We heard oral evidence on six occasions in the
course of this inquiry: from Mr James Barty, Chief European Equities
Economist, Deutsche Bank, Professor Iain Begg, Joint Director,
European Institute, South Bank University, Mr Roger Bootle, Specialist
Adviser to this Committee on Monetary Policy, Professor Willem
Buiter, former member of the Bank of England Monetary Policy Committee
and now Chief Economist of the European Bank for Reconstruction
and Development, and Dr Daniel Gros, Director, Centre for European
Policy Studies (CEPS), on 13 June; from Commissioner Pedro Solbes
Mira, the European Commissioner responsible for Economic and Monetary
Affairs, and Commission officials, on 15 June; from Mr John Cushnaghan,
Managing Director, Nissan Motor Manufacturing UK Ltd, Mr Andrew
Thomas, Managing Director, The Nature Store plc, Mr Hugh Morgan
Williams, Chairman, Canford Group plc, and Mr Simon Wolfson, Managing
Director, Next plc, on 20 June; from the British Bankers' Association
(BBA), the Confederation of British Industry (CBI), the Institute
of Directors, and the Trades Union Congress (TUC), on 27 June;
from Dawn Primarolo MP, Paymaster General, Miss Melanie Johnson
MP, Economic Secretary, and officials, HM Treasury, on 11 July;[6]
and from Rt Hon Gordon Brown MP, Chancellor of the Exchequer,
on 25 July.[7]
We visited Frankfurt and Berlin on 6-8 June in connection with
this inquiry and a list of the briefings we received is annexed
to this Report. We are grateful to all those who gave oral evidence
or assisted with our briefings, and for the written evidence,
much of it of an extremely high quality, which we have received.
2 Treasury Committee, 1997-98, Fifth Report, The
UK and Preparations for Stage Three of Economic and Monetary Union,
HC503-I (hereafter EMU98); also see 1998-99, Minutes of
Evidence, The National Changeover Plan, HC290-i Back
3
HC Deb, 27 Oct 97, c584 Back
4
EMU98, paragraph 6 Back
5
And see Qq175-6; App 17 paragraphs 1.10-1.13, sections 2 and 3 Back
6
This evidence session also included questions on the latest ECOFIN
Ministerial meeting Back
7
This evidence session also included questions on the 2000 Spending
Review (not printed with this Report) Back
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