PROCEEDINGS OF THE COMMITTEE RELATING TO THE REPORT
Motion made, and Question proposed, That the Chairman's
draft Report be read a second time, paragraph by paragraph.—(The
Chairman.)
Amendment proposed, to leave out the words "Chairman's
draft Report" and insert the words "draft Report proposed
by Sir Teddy Taylor".—(Sir Teddy Taylor.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 4 | Noes, 6
|
| Mr Michael Fallon | Mr Nigel Beard
|
| Mr David Ruffley | Mrs Liz Blackman
|
| Sir Michael Spicer | Mr Jim Cousins
|
| Sir Teddy Taylor | Mr Edward Davey
|
| Mr David Kidney
|
| Mr James Plaskitt
|
Another Amendment proposed, to leave out the words
"Chairman's draft Report" and insert the words "draft
Report proposed by Mr Michael Fallon, Mr David Ruffley and Sir
Michael Spicer".—(Mr David Ruffley.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 4 | Noes, 6
|
| Mr Michael Fallon | Mr Nigel Beard
|
| Mr David Ruffley | Mrs Liz Blackman
|
| Sir Michael Spicer | Mr Jim Cousins
|
| Sir Teddy Taylor | Mr Edward Davey
|
| Mr David Kidney
|
| Mr James Plaskitt
|
Main Question put.
The Committee divided.
| Ayes, 6 | Noes, 4
|
| Mr Nigel Beard | Mr Michael Fallon
|
| Mrs Liz Blackman | Mr David Ruffley
|
| Mr Jim Cousins | Sir Michael Spicer
|
| Mr Edward Davey | Sir Teddy Taylor
|
| Mr David Kidney |
|
| Mr James Plaskitt |
|
Ordered, That the Chairman's
draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 4 read and agreed to.
Paragraph 5 read, amended and agreed to.
Paragraphs 6 to 8 read and agreed to.
Paragraph 9 read, amended and agreed to.
Paragraph 10 read and agreed to.
Paragraph 11 and 12 read, amended and agreed to.
Paragraph 13 read, as follows:
The implications for Stage Three of EMU of the decline
in the external value of the euro were not considered significant
by some witnesses. Credit Lyonnais UK argued that it was "wrong
to judge the credibility of the ECB and the single currency in
terms of the [external] value of the euro against the [US] dollar",
adding that "Americans do not perceive the dollar in this
way". Mr Bootle said that the depreciation of the external
value of the euro should not be interpreted "as a sign that
the currency is fundamentally flawed". Professor Begg observed:
"internally ... things have worked well within Euroland;
externally we are dominated, especially in this country, by what
we see on the foreign exchange markets which is that the euro
is a complete disaster. I think that is a false perception".
Nevertheless, as the President of the ECB has observed, "a
persistently lower euro exchange rate may ... undermine the perception
of the euro as a stable currency", a view shared by Commissioner
Solbes, who agreed that the "psychological effect of [euro]
weakening is not positive", although he hoped this was simply
a consequence of a "period of volatility ... which is, of
course, not permanent". He also thought that the external
value of the euro mattered insofar as it had an effect on inflation.
Dr Gros argued that the fall in the euro's external value to date
was not seriously a "menace" to price stability and,
as a consequence, the ECB was unlikely to intervene, adding that,
if it did, intervention would need to be coordinated with other
central banks to be effective. The ECB has, however, attempted
to 'talk up' the euro, most notably in a statement by Dr Duisenberg
in May 2000 in which he said that the ECB would "monitor
the euro exchange rate very closely". The Institute of Directors
concluded that "given the lack of major labour, tax and social
security reforms ... in Euroland it is difficult to see the euro
as a strong currency".
Amendment proposed, in line 21, at the end, to add
the words "The balance of evidence, however, is that the
fall in the external value of the euro has benefited economies
in Euroland. Therefore too much has been made of the depreciation
of the euro. We do not believe the euro's depreciation is a sign
of any underlying weakness or failure.".—(Mr
Edward Davey.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 2 | Noes, 8
|
| Mr Nigel Beard | Mrs Liz Blackman
|
| Mr Edward Davey | Mr Jim Cousins
|
| Mr Michael Fallon
|
| Mr David Kidney
|
| Mr James Plaskitt
|
| Mr David Ruffley
|
| Sir Michael Spicer
|
| Sir Teddy Taylor
|
Another Amendment proposed, in line 21, at the end,
to add the words "The balance of evidence, however, is
that the fall in the external value of the euro has benefited
economies in Euroland.".—(Mr Jim Cousins.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 4 | Noes, 6
|
| Mr Nigel Beard | Mrs Liz Blackman
|
| Mr Jim Cousins | Mr David Kidney
|
| Mr Edward Davey | Mr James Plaskitt
|
| Mr Michael Fallon | Mr David Ruffley
|
| Sir Michael Spicer
|
| Sir Teddy Taylor
|
Paragraph agreed to.
Paragraph 14 read, as follows:
Witnesses predicted that the external value of
the euro would appreciate in due course, and this was also the
prevailing view we found in Germany. However,
as demonstrated at the launch of the euro, expectations of future
exchange rates do not necessarily come to fruition. A recent IMF
working paper calculated that, in January 1999, the euro was 7.4
per cent undervalued against the US dollar, yet, despite this
apparent misalignment, the currency's deprecation continued throughout
1999. Mrs Rosewell wrote that the future course of an exchange
rate could not be predicted on the basis of whether it seemed
over- or under-valued. This may explain the degree of circumspection
in regard to predicting when and by how much the external value
of the euro might appreciate; while Dr Gros, of the CEPS, was
confident that fundamental equilibrium exchange rate theory would
support an appreciation of the external value of the euro, he
was rather unspecific as to when this would take effect, merely
saying that he expected the euro to appreciate over a ten year
period.
An Amendment made.
Another Amendment proposed, in line 1, to leave out
the word "would" and insert the word "might".—(Mr
Michael Fallon.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 5 | Noes, 5
|
| Mr Edward Davey | Mr Nigel Beard
|
| Mr Michael Fallon | Mrs Liz Blackman
|
| Mr David Ruffley | Mr Jim Cousins
|
| Sir Michael Spicer | Mr David Kidney
|
| Sir Teddy Taylor | Mr James Plaskitt
|
Whereupon the Chairman declared himself with the
Noes.
Another Amendment proposed, in line 2, to leave out
the words "and this was also the prevailing view we found
in Germany".—(Mr Michael Fallon.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 6 | Noes, 3
|
| Mr Michael Fallon | Mr Nigel Beard
|
| Mr David Kidney | Mrs Liz Blackman
|
| Mr James Plaskitt | Mr Jim Cousins
|
| Mr David Ruffley |
|
| Sir Michael Spicer |
|
| Sir Teddy Taylor |
|
Paragraph, as amended, agreed to.
Paragraph 15 read, as follows:
The European Central Bank was established on 1 June
1998, subsuming the role of the four and a half year old European
Monetary Institute (EMI). The independence of the ECB is enshrined
in the Maastricht Treaty, and Professor Buiter argued that the
ECB was more independent than the Bank of England. The ECB has
greater operational independence, as there are no reserve powers
for monetary policy held by other institutions, and the ECB is
also able to define what is meant in the Maastricht Treaty by
price stability, which has led the Bank to set its own inflation
target, something which has been questioned in recent weeks. The
ECB's primary objective is to "maintain price stability"
in the euro-area and, without prejudice to that, to "support
the general economic policies in the Community with a view to
contributing to the achievement of the objectives of the Community".
Amendment proposed, in line 7, to leave out the words
"something which has been questioned in recent weeks"
and insert the words "an arrangement which is coming under
question".—(Mr James Plaskitt.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 5 | Noes, 3
|
| Mr Nigel Beard | Mrs Liz Blackman
|
| Mr Edward Davey | Mr Jim Cousins
|
| Mr Michael Fallon | Mr David Kidney
|
| Mr James Plaskitt |
|
| Mr David Ruffley |
|
Paragraph, as amended, agreed to.
Paragraph 16 read, as follows:
Monetary policy decisions are the responsibility
of the ECB's Governing Council, which consists of the central
bank governors of the eleven euro-area national central banks
and six members of the Executive Board of the ECB. The size of
the ECB Governing Council was criticised by some witnesses, particularly
with a view to the implications of the enlargement of the euro-area.
Mr Barty warned that, if the present system continues, whereby
every member state's central bank governor sits on the Governing
Council, this could make the body "extremely cumbersome indeed"
and hinder efficient decision making. Solutions, including a strengthening
of the Executive Board's role, a new mechanism to restrict the
size of the Governing Council, or a move towards qualified majority
decision making were offered as solutions by some witnesses. In
Professor Buiter's view, the problem is accentuated because the
ECB takes monetary policy decisions by consensus, rather than
by majority voting. This, Mr Barty believed, in part explained
why the ECB appeared "confused or lagging behind" in
setting the appropriate interest rate. Commissioner Solbes emphasised
that the structure of the Governing Council was enshrined in the
Maastricht Treaty, and any change would have to be preceded by
an amendment to the Treaty.
Amendment proposed, at the end, to add the words
"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.".—(Mr
Nigel Beard.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 5 | Noes, 5
|
| Mr Nigel Beard | Mrs Liz Blackman
|
| Mr Edward Davey | Mr Jim Cousins
|
| Mr James Plaskitt | Mr Michael Fallon
|
| Mr David Ruffley | Mr David Kidney
|
| Sir Teddy Taylor | Mr Brian Sedgemore
|
Whereupon the Chairman declared himself with the
Ayes.
Paragraph, as amended, agreed to.
Paragraphs 17 and 18 read and agreed to.
|
