PROCEEDINGS OF THE COMMITTEE RELATING TO THE REPORT
Another Amendment proposed, in line 20, after the
words last added, to add the words "For the euro to be
successful, we believe that structural reform, especially reform
of labour markets, is essential. However, empirical evidence is
lacking that there is the political will amongst euro-11 members
to deliver such reform.".—(Mr Michael Fallon.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 4 | Noes, 7
|
| 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
|
| Mr Brian Sedgemore
|
Paragraph, as amended, agreed to.
Paragraph 27 read, amended and agreed to.
Paragraph 28 read and agreed to.
Paragraph 29 read, as follows:
French Finance Minister, Laurent Fabius, is reported
to have called recently for the euro-11 group of finance ministers,
which meets informally before European Council of Finance Ministers
(ECOFIN) meetings, to be given a stronger role, although it is
not yet clear what that role might be. The role of the euro-11
group of finance ministers was seen by Professor Buiter as facilitating
the coordination of fiscal policy with monetary policy in the
euro-area. He envisaged the euro-11 group usurping many of the
functions of ECOFIN, including consideration of issues such as
EU financial market integration. Professor Begg agreed, pointing
out that euro-11 had only been established because ECOFIN was
unable to fulfil its original role because not all EU states were
participating in Stage Three of EMU. The Economic Secretary offered
reassurance that nothing had changed the agreement of the 1997
Luxembourg Council that the euro-11 group would only "meet
informally ... to discuss issues connected with their shared specific
responsibilities for the single currency". Mr O'Donnell,
of HM Treasury, added that, if the euro-11 group attempted to
usurp ECOFIN, "the governing procedures where vetoes hold
will all be governed by ECOFIN procedures, so there is no change
whatsoever". 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.
An Amendment made.
Another Amendment proposed, in line 15, to leave
out from the word "for" to the end of the paragraph
and add the words "the euro-area and group to subsume
the role of ECOFIN."—(Mr James Plaskitt.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 5 | Noes, 5
|
| Mr Michael Fallon | Mr Nigel Beard
|
| Mr James Plaskitt | Mrs Liz Blackman
|
| Mr David Ruffley | Mr Jim Cousins
|
| Sir Michael Spicer | Mr David Kidney
|
| Sir Teddy Taylor | Mr Brian Sedgemore
|
Whereupon the Chairman declared himself with the
Noes.
Another Amendment proposed, in line 17, at the end,
to add the words "The British Government will need to
ensure that, while Britain remains outside EMU, the euro-area
group does not usurp the role of ECOFIN in shaping economic policy."—(Mr
Nigel Beard.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 6 | Noes, 4
|
| Mr Nigel Beard | Mrs Liz Blackman
|
| Mr Michael Fallon | Mr Jim Cousins
|
| Mr David Kidney | Mr James Plaskitt
|
| Mr David Ruffley | Mr Brian Sedgemore
|
| Sir Michael Spicer |
|
| Sir Teddy Taylor |
|
Another Amendment proposed, in line 17, after the
words last added, to add the words "We therefore urge
the Government to make clear that it would veto any attempt to
alter the constitutional position of ECOFIN which would weaken
its authority".—(Mr Michael Fallon.)
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 David Kidney
|
| Mr James Plaskitt
|
| Mr Brian Sedgemore
|
Question put, That the paragraph, as amended, stand
part of the Report.
The Committee divided.
| Ayes, 7 | Noes, 1
|
| Mr Nigel Beard | Mr James Plaskitt
|
| Mrs Liz Blackman |
|
| Mr Jim Cousins |
|
| Mr Michael Fallon |
|
| Mr David Kidney |
|
| Mr David Ruffley |
|
| Mr Brian Sedgemore |
|
Paragraphs 30 and 31 read and agreed to.
Paragraph 32 read, as follows:
Some witnesses were relatively unconcerned by the
distant prospect of the admission of accession countries to Stage
Three of EMU. Professor Begg and Mr Ardy, for example, wrote that
"if the five front runners [for accession] were to join the
EU, they would increase its population by about a sixth, but boost
real GDP by less than half that proportion if measured in purchasing
power parities and by about three per cent if measured in euros
... it would be the equivalent of adding a country of the economic
weight of the Netherlands to the euro area". Corus wrote
that the implications for EMU of EU enlargement "should be
negligible" but warned that "it cannot be excluded that
changes in sentiment affect the value of the euro more than is
justified", and the Chemical Industries Associations recommended
"institutional reform to improve flexibility, transparency
and competitiveness" as a necessary complement to enlargement.
Some witnesses expressed concern at the prospect of central and
eastern European countries participating in Stage Three. Mr Forder
concluded that "if the EU is enlarged and the new members
join the euro, this will make the area larger and more diverse
and thereby exacerbate the problems that already exist".
The Institute of Directors expressed the view that "the main
implication for the euro of enlargement is the potential burden
on the EU's finances ... an increased burden of taxation may be
the outcome with its negative implications for the euro".
It is vital that the economic criteria used to assess whether
countries should participate in Stage Three are respected for
all applicants, including those which are deemed too small to
have significant affects on the euro-area economy.
An Amendment made.
Another Amendment proposed, in line 19, at the end,
to add the words "We note that Greece was admitted to
euro membership without fully satisfying the Maastricht criteria,
and that this did not strengthen market perceptions of the new
currency".—(Mr Michael Fallon.)
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 David Kidney
|
| Mr James Plaskitt
|
| Mr Brian Sedgemore
|
Paragraph, as amended, agreed to.
Paragraph 33 read and agreed to.
Paragraph 34 read, as follows:
A key issue if the UK were to decide to join Stage
Three of EMU would be how the exchange rate criterion could be
met. It is not clear whether the UK would be required to join
the semi-fixed exchange rate mechanism (ERM2) similar to the system
which the eleven existing members of Stage Three were part of
before the launch of the euro, or whether a period of exchange
rate stability outside of ERM2 would do. In our 1998 report we
invited the Treasury to spell out in more detail its thinking
on how the UK could achieve exchange rate stability before joining
Stage Three, an opportunity which was not taken up. In oral evidence,
the Economic Secretary told us that "we have no intention
of being either in an ERM2 or shadowing the euro or whatever arrangement
there might be" and Mr O'Donnell observed that the Maastricht
Treaty "does not specify anything with respect to exchange
rate stability for a period post-euro". The Treasury has
accepted that "exchange rate stability is an important part
of preparation for EMU" but argued that "what matters
for exchange rate stability are sound economic fundamentals. For
Britain, the best way to achieve this is through the monetary
and fiscal framework which we have set in place". As many
witnesses pointed out, however, the sterling/euro exchange rate
has been anything but stable since the launch of the single currency.
Witnesses offered a range of views on the sterling/euro exchange
rate at which it might be appropriate for the UK to join Stage
Three; the length of time and the mechanisms required to establish
that such a rate was the right one; and the changes which might
be required to the UK's monetary policy regime in order for the
exchange rate, rather than inflation, to be the target variable.
Some argue that if a decision were taken for the UK to join Stage
Three, exchange rate stability might need to replace price stability
as the primary goal of monetary policy during the transition period
before full membership. As Professor Buiter explained, "if
the Chancellor and the Government decide that joining is going
to be a serious objective, then the exchange rate has to become
the overriding nominal target. You cannot be a little bit pregnant
in these things. You have to do it seriously and have a formal
change in the [Bank of England's] mandate".
Amendment proposed, in line 25, at the end, to add
the words "The Government needs to clarify its position
on the process it envisages in order to meet the Maastricht criterion
of exchange rate stability during the period of preparation for
a possible entry into Stage Three of EMU.".—(Mr
James Plaskitt.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 5 | Noes, 5
|
| Mrs Liz Blackman | Mr Nigel Beard
|
| Mr Michael Fallon | Mr Jim Cousins
|
| Mr James Plaskitt | Mr David Kidney
|
| Mr David Ruffley | Sir Michael Spicer
|
| Mr Brian Sedgemore | Sir Teddy Taylor
|
Whereupon the Chairman declared himself with the
Noes.
|
