Verbatim report of proceedings

Wednesday, 17 May 2000 - Strasbourg

4. Adoption of single currency by Greece

  President. – The next item is the report (A5-0135/2000) by Mr Goebbels, on behalf of the Committee on Economic and Monetary Affairs, on the proposal for a Council decision for the adoption by Greece of the single currency on 1 January 2001 (COM(2000)274 – C5-0226/2000 – 2000/0110(CNS)).

  Goebbels (PSE), rapporteur. – (FR) Mr President, Greece will be the twelfth country to sign up to the euro. Greece does not have to beg to be allowed into the euro zone; it is fully qualified to join the States that will introduce the euro as an effective and definitive means of payment in 2002.

In Greece, the economic convergence criteria have been met, as a result of a stabilisation policy implemented most consistently by the Greek authorities since 1996. At the beginning of the 1990s, Greece was considered the sick man of Europe, economically speaking. The rate of inflation exceeded 20%. The European Union officially described the budgetary deficit as excessive. The public sector was notoriously mismanaged. Almost half of the public debt was due to on-going transfers from the state to public undertakings.

Today, major international bodies such as the IMF, the OECD, the Commission and even the ECB generally speak very highly of the efforts which the Greeks have made. It must be noted that private operators have also discovered Greece. In recent years, it has become a significant net recipient of foreign capital. The stock exchange has undergone rapid expansion. International rating agencies have improved their rating for Greek loans. The situation is far from perfect, of course. There are still problems, particularly regarding the restructuring of the public sector.

The Committee on Economic and Monetary Affairs stresses the following points. Greece must continue to make efforts in order to ensure that the progress achieved in terms of disinflation has a lasting effect. The government must step up the anti-inflationist bias of the economic policy instruments available to it, particularly in the fields of the budget and income policy.

Cooperation between the two sides of industry seems essential in order to maintain a situation of non-inflationary growth. Even if considerable progress has been achieved in terms of the implementation of structural reforms, Greece must step up progress in the reforms which are still necessary, including the effective transposition of European legislation into national law. Parliament has been consulted, in the context of a political decision to be taken by the Economic and Financial Affairs Council, after deliberation by the forthcoming European Council. Parliament’s response can therefore only be a political one, in favour or against, like any final decision in a genuine democracy.

Greece’s entry into the euro zone does not entail any political risks. Greece is entitled and, indeed, obliged to join EMU. There are probably some economic risks but these are more significant for Greece than for the countries in the euro zone. In joining the euro zone, Greece will be forced to maintain the culture of stability which has been established since 1996, and this involves pursuing a responsible economic policy. This has, however, already created a virtuous circle leading to sustainable, non-inflationist growth, proving that stability is not an end in itself but that it must serve the purpose of healthy growth. The Committee on Economic and Monetary Affairs, by an overwhelming majority, therefore urges Parliament to vote in favour of Greece’s accession to the euro zone in 2001.

Mr President, let me add a few more personal observations. I should like to congratulate the Danish and Swedish governments on having decided to consult their citizens regarding accession to the single currency. I hope that the results of these plebiscites will be favourable. In the same way, I should like to see the United Kingdom opt for the single currency in the very near future.

The shared objective of the fifteen Member States to create a European Union which is ever more closely bound, particularly comprising an area without internal borders, could not be achieved in full without a single currency. The United Kingdom, as one of the financial capitals of the world, will not be able to claim all the advantages of an ever more integrated European financial market unless it becomes part of it in its own right and takes on all the joint responsibilities and obligations required under Economic and Monetary Union.

There are some Members of Parliament who will vote against my report tomorrow, or who will abstain. Some are opposed to the euro, as is their right, while others are attempting to make political capital out of the real concerns which our fellow citizens have regarding the dollar-euro exchange rate.

It must be stressed that the euro is a stable currency. Citizens’ purchasing power within the euro zone has remained virtually unchanged since inflation has been, and remains, at a very moderate level.

Of course, the value of the euro has fallen in relation to the dollar and, to a lesser extent, in relation to the yen and the pound. Such fluctuations are inevitable in a floating exchange rate system. Even so, the euro has not become a weak currency. In the last twenty years, the Deutschmark has experienced much more extreme variations in relation to the dollar. In 1985, the dollar stood at 3.5 DM. In order to reach such a low level in relation to the dollar, the rate of the euro would have to fall below 0.6 to the dollar. Some people claim that the financial markets do not value the euro because of Europe’s tardiness in implementing structural reforms. What structural reforms did Germany undertake after 1985 in order to ensure that the Deutschmark returned to a rate of 1.7 or 1.8 DM to the dollar?

The fact is, the economic position of the European Union is very sound, and is much more favourable than it has been over the last decade. The only grey area is a rate of unemployment which, although falling, is still excessive. A return to full employment is certainly not calculated to please the financial markets most of all. Generally speaking, good news regarding employment makes the stock exchange nervous, as it makes them afraid of a rise in inflation. Financial markets operate according to their own particular logic. They look for immediate returns, and currently this is a safer bet in the United States, particularly because of its higher interest rates. This trend looks set to continue, as the Federal Reserve has just hiked up its interest rates. With their sheep-like behaviour, however, the markets will ultimately come to realise, Mr President, that, in the medium term, the euro will be a more secure currency than the dollar.

  Karas (PPE-DE). – (DE) Mr President, Commissioner, ladies and gentlemen, firstly, I would like to point out, as did the previous speaker, that a functioning internal market needs a single currency. Secondly, there is a rumour that needs to be dispelled right from the outset of this debate, to the effect that the external value of the euro has something to do with the prospect of Greece adopting the single currency. It is clear that the external value of the euro has nothing to do with this but everything to do with the lack of resolve shown by certain Member States when it comes to implementation of the necessary structural and liberalisation measures, and it can also be attributed to the fact that there are a number of differences – starting with taxation levels – in the ways that Europe and the United States structure their economies.

Therefore, on behalf of my Group, I would like to congratulate Greece and acknowledge the efforts and progress it has made en route to membership of the Economic and Monetary Union. Further to what I have already said about the convergence report, we are very much in favour of Greece joining the Economic and Monetary Union. This clear endorsement is not diminished in any way when, so as to remain true to our firm belief in a strong euro, sustainability, price stability, and equal treatment of all countries, we inevitably make reference to the need for Greece to keep up the good work, and encourage it to do so, and also point out that a great deal still remains to be done in Greece before sustainable price stability and a balanced low-debt state sector are achieved.

I say this because whilst we recognise that there has been a sharp decline in the rate of inflation, this can be attributed in part to transient factors. It is therefore absolutely essential for Greece to step up its efforts to support sustainable price stability. I say this because substantial structural reform and continuous budgetary surpluses are required under the terms of the Stability and Growth Pact, so as to gradually reduce the public debt ratio to 60%.

We are in favour of Greek membership, but would call upon and encourage Greece to continue to implement the necessary measures and to guarantee sustainability in the spirit of the Stability Pact.

On a final note though, I would also like to appeal to Sweden to at last discharge its political duties, now that it has fulfilled many of the criteria. This is because the Swedish government is currently dragging its heels over joining stage 2 of EMU and amending the bank of issue law, which would guarantee the independence of the ECB when a new member joins.

(Applause)

  Randzio-Plath (PSE). – (DE) Mr President, the Group of the Party of European Socialists is convinced by the efforts Greece has made to fulfil the convergence criteria. We support the recommendation and the rapporteur’s report. It is important for the European internal market to at last be properly completed. This will only be feasible if every last Member State of the European Union joins monetary union. It is therefore important from the point of view of business and commerce for all EU States to join, especially those that are able to fulfil the convergence criteria. Only then will it be possible to protect an even larger part of the economic area against exchange rate fluctuations.

A large currency union would also improve our chances of being able to coordinate economic policies, and hence achieve deeper European integration. Like any other Member of the European Monetary Union, Greece will have to continue to make efforts and to acquit itself of its responsibilities. That goes without saying, particularly where the level of debt in Greece is concerned. As mentioned before, Greece, along with Belgium and Italy, have been singled out for monitoring on this aspect. But I would also like to ask you once again to consider that the examination of other States’ stability programmes that took place last year also gave rise to criticism. As such, Greece is not the only State to have to keep proving itself over and over again in this respect.

A permanent Community of solidarity – which is precisely what monetary union is – demands sustained harmonisation activity. That is what the partners of monetary union have promised themselves and they must keep their promise. Both the Treaty and the Stability and Growth Pact give expression to this.

Like other Members before it, Greece is going to have to work on being able to sustain its fulfilment of the convergence criteria. The interest rate adjustments that Greece needs to make to bring it into line with the euro zone are making heavy demands on its economy, society and social partners. That is why it is so important for there to be consensus between the major political parties and the social partners. It will enable us to feel confident that Greece will prove to be a successful partner in monetary union.

There is no reason to fear that monetary union will be weakened by Greece joining, because it is the stability of the currency that matters. Any country that wants to join the euro zone must fulfil the convergence criteria. In the long term, internal stability is only crucial to the external value of a currency. The fact that the average rate of inflation in the euro zone is 1.9% is a clear illustration of this. I would remind you once again, in this connection, that the Treaty of Maastricht states that we need a monetary policy that guarantees the stability of the currency. This was achieved in the first few months of the euro zone’s existence. The dollar/euro exchange rate cannot be used to guide monetary policy. What matters is that the internal purchasing power of the euro is very stable, as used to be the case with the Deutschmark.

  Huhne (ELDR). – Mr President, on behalf of the Liberal Group I would like to welcome Greece into the euro and say that we shall certainly be voting in favour of Greek membership. For those other ‘out’ countries, including my own, I very much hope that they will be able to join the euro soon. I very much regret too that there are so few British Conservatives here in the Chamber today because it shows, with Greece now the twelfth member of the euro zone, how far from reality British euroscepticism about the future of the currency is.

The euro has successfully delivered low inflation, rising growth, falling unemployment and protection for the euro zone economies from the ups and downs of the foreign exchanges. Indeed, the British perception of the euro as a failure, because of its fall against the dollar, simply misunderstands the whole project. The key test of a currency is price stability within the economy, not the value of the currency against other currencies outside the economy.

On the test of internal stability, with inflation at less that 2% and growth higher at 3.1% in the euro zone than in Britain, the euro is clearly succeeding. Indeed, research at the Bank of Tokyo-Mitsubishi recently calculated the euro’s value as if it had existed over the last few decades, weighting each predecessor currency's value to create a synthetic euro. Historically, that research found that the euro actually swooped between a high of USD 1.70 in December 1979 and a low of just USD 0.69 in February 1985. In other words, the euro could stay within its historic trading range and happily now either fall by a further 23% or rise by 188%. Certainly that synthetic euro included currencies such as the Italian Lira, but the same point applies even to the mighty German Mark on its own.

If the euro is a weak currency, than the Mark was positively anaemic. It plunged to DEM 3.45 against the dollar at the end of February 1985, which is a third below its current rate of DEM 2.16 to the dollar. Within three years, and a dollar crash, the Mark was back to DEM 1.57 during December 1987.

The truth is that the history of foreign exchange is a history of gross misalignments, of overvaluations and undervaluations, each inflicting either depressive pain or inflationary costs on the economy and, as Greece has rightly recognised, the euro is a way of regaining control over a key part of our economic environment.

  Papayannakis (GUE/NGL). – (EL) Mr President, the report under discussion contains accurate information and an objective assessment. Greece is being judged, just as the first countries in EMU were judged, and this judgement accords Greece the position which it deserves, the position which it could have taken up back then, when it could have become a member of EMU along with everyone else, but which it failed to take up because of the weakness of its government. In all events, this moment is an historic moment for Greece and, may I say, for Europe too. I hope that we shall see other such historic moments when other countries join and, even more so, when we proceed, as we must, with the policy to complete unification. The euro restored politics to Europe and it is incumbent upon us to pave the way so that politics in Europe can be institutionalised and globalisation, which is progressing blindly, without any historical or political plan, can be politicised at a later date, through a unified Europe,

For Greece and the other members of EMU, the problem of sustainability is crucial. The problem of whether or not they will be able to act together on economic policy, as if they had already achieved political unification, is a political problem par excellence. It is a problem of development choices and changes and, of course, it is a problem of public finance management. Greece has a tax reform problem. A large part of the economy pays no taxes and the basic taxes which exist in other Member States do not exist in Greece. The average Greek taxpayer pays more than other Europeans but total tax revenues in Greece are much lower as a percentage of GDP. This structural change is pending, while our government is confining itself mainly to privatisation. Other important structural changes are also pending, such as the need to strengthen regional authorities and their financial independence, reorganise cooperatives in all sectors from the bottom up and liberalise and strengthen the social economy and the third sector. These are the areas which need to be strengthened immediately if sustainability is to have a future.

  Berthu (UEN). – (FR) Mr President, the European Parliament report on Greece’s adoption of the single currency on 1 January 2001 is remarkable, more by virtue of the political will it expresses to enlarge the euro zone than by its concern for technical exactitude. It is, however, true that Greece has made considerable efforts in order to meet the Maastricht criteria and has achieved good progress, except in a few areas, such as public debt, but on that subject there are some countries within the euro zone that are doing no better.

These minor failings, which would have had little impact if the euro had been strong, are now liable, against the background of the euro’s depreciation, where the slightest ambiguity serves to detract from the image of the single currency, to have a much more negative effect, for psychological reasons. Nonetheless, the European institutions did not feel that they should postpone Greece’s accession so as not to give the impression that they had anything to fear and, from that point of view, the position seems perfectly logical, albeit somewhat risky.

The Union for a Europe of Nations Group almost agrees with their conclusions, but as a result of a very different logical argument. Our initial impulse, obviously, would be to refrain from participating in a debate which a good number of us think is nothing to do with us. But, on the other hand, we think that extending the euro zone may, in the end, provide the stimulus for beneficial reforms. The fact is, the more the euro zone is extended, the harder it will be for the single currency to represent nations which are very different, and the more it will be recognised that it would be much simpler to make the system more flexible by having the euro develop into simply a common currency, overlapping with the national currencies with a degree of flexibility but not replacing them. This solution, of progress towards a shared currency, would probably attract the support of the countries within the European Union which, until now, have remained outside the euro zone, creating a shared point of reference for everyone, and putting an end to the current schism, which is disastrous for the credibility of Europe as a whole.

  Giannakou-Koutsikou (PPE-DE). – (EL) Mr President, the Council’s legislative proposal on the adoption by Greece of the single currency on 1 January 2001 is a positive proposal which responds to the objectives of the European Union to strengthen social and economic cohesion through Economic and Monetary Union. The New Democracy team within the European People’s Party has always vigorously supported the policies needed so that Greece, which was outside the first round of Member States, could honour the obligations needed in order to join the euro zone. The truth is that Greece now meets the convergence criteria, with the exception of the public debt criterion. However, this also applied in the case of Italy and Belgium and Greece should not suffer adverse discrimination in the present case.

In fact, economic development and convergence policies started in Greece at the beginning of the 1990s, as both the Commissioner and the representative of the European Central Bank stressed during the meeting of the Committee on Economic and Monetary Affairs, and they concern various governments and various political powers. However, they are due mainly to the efforts of the Greek people as a whole. Policies in Greece need to focus today on further structural changes, while maintaining an anti-inflationary line, with the aim of achieving a real social market economy in conditions of healthy competition, so that Greece can keep comfortably to the Dublin Stability and Development Pact.

EMU will be a real success once it succeeds in uniting all the Member States, far more Member States such as Sweden, where convergence is proceeding exceptionally well. I hope that soon the verdict of the Swedish people will take the completion of the euro zone one step further. For the time being, we call on the European Parliament to vote in favour of Greece’s accession to the euro zone and we assure you that, as far as we, the main opposition are concerned, we shall use our policies to support the efforts being made to apply the rules of the Stability Pact and to honour joint European obligations within the framework of a unified country without borders.

(Applause)

  Blokland (EDD). – (NL) Mr President, Greece meets the convergence criteria according to the European Commission’s verdict, which is based on a very nominalistic interpretation. Every self-respecting economist knows that Greece, despite the impressive achievements of the past couple of years, does not yet have inflation and government debt sufficiently under control or in order.

The Greek government has major financial interests in an extensive number of government enterprises which are mostly loss making. In 2001, the derogation for the liberalisation of various sectors will lapse, at which point the large hidden government debt – half the size of the current one – will become public. Why did the Commission not take these skeletons in the cupboard into consideration during the assessment? On 17 January last, the Greek drachma was revalued by 2.5%, mainly to push down inflationary trends. At the moment, the short-term interest rate in Greece is about 600 basic points above the European Central Bank’s level. Participation from 1 January 2001 means that the short-term interest rate must come down by the end of this year at the latest. As a result, the credit facility will expand considerably and Greece will be unable to meet the inflation criterion. Why does the Commission turn a blind eye to this?

In the interests of the Greek citizens and a more flexible development of the Greek economy, we are forced to decline our support for this Commission proposal.

  Katiforis (PSE). – (EL) Mr President, I wish to thank the rapporteur for his serious and objective approach to Greece’s candidacy. I wish to thank him because he dealt with us just as strictly as all the Member States which preceded us in forming the single currency. This is the biggest compliment which he could give a country which, for a while, gave the impression that its economy was on the slippery slope towards general disintegration. The world has many examples of where such a slippery slope can lead; however, there are relatively few examples of a country which has found the strength not only to stop but to reverse the decline and manage to satisfy the extremely stringent stability criteria of today’s world.

This success is particularly significant because it was built on the basis of an economy which was not rich and not particularly strong. We do not need you to remind us that the Greek economy is weak. We know it is. For a nation to build monetary stability on such a basis requires greater effort and sacrifice than in a richer economy. The fact that the Greek people agreed to make these sacrifices is proof positive of their determination to break away once and for all, by their own efforts and taking advantage, of course, of the support of the European Union, from the fate of economic backwardness. And we shall make the same effort in the future, not because you are strict and we have to, but because it is in our interests to do so. This effort is dictated by our wish to have a better standard of living, to run a modern economy and to prosper with the rest of Europe. We are here not because we wanted to conceal our weaknesses, but because we wanted to fight and we fought and we won.

As far as we are concerned, we are a small country, but we are fighters and our accession to the single currency is a vote of confidence in this huge European venture; it is a sign of the fact that we support the European endeavour and we hope that other, far richer countries will see this and follow our example.

No one should rejoice prematurely at the present vicissitudes of the single currency. In joining, we have shown our trust in Europe, in monetary union, in the prospect of economic unification and in the success of our common economic fate. That is the meaning of Greece’s accession, that is the meaning of its acceptance. Europe has become stronger today, not weaker, as the result of Greece’s accession.

(Applause)

  Olle Schmidt (ELDR). – (SV) Mr President, the Commission’s and the ECB’s convergence report deals not only with the Greek, but also with the Swedish, convergence programme. So too does Mr Goebbels’ report, even if the part about Sweden is limited. The Swedish economy is doing well – very well. Mr Goebbels also points this out. In common with Mr Karas and Mrs Randzio-Plath, he also issues a reminder that the EU would be that much stronger if all the Member States were to participate in EMU. This is a timely reminder of something which is self-evidently the case. If one is going to join the EU, one should not do so by halves.

Even if the economies of Great Britain, Denmark and Sweden are going well, it must be clearly pointed out, as it was by Commissioner Solbes Mira in the Committee on Economic and Monetary Affairs, that, if the spirit of the Treaty is to be complied with, no Member State can, in the long term, place itself outside so strategic an area of cooperation as the common currency. This could have been brought out more clearly in the report.

The euro has provided greater stability. This has benefited companies, especially small companies. Price competition has increased, and there has been greater transparency. The euro is not weak. Instead, it is the dollar which is extremely strong. Allow me to remind those countries outside the euro zone that there is a danger of their influence declining further. Last week, we learned that France’s prime minister wants to see a Euro 11 – soon a Euro 12 – with more influence and power when it comes to economic and financial policy.

At present, the economy is on the way up in Europe, but the clouds are gathering – in the United States and in Europe. You do not buy an umbrella once it has begun to rain. Instead, you buy an umbrella when the sun is shining so that you are prepared for when the rain comes. The euro provides Europe with economic stability and competitiveness.

There are very strong economic and moral reasons why Sweden should join EMU. Sweden should also have an obligation to help increase Europe’s economic competitiveness. I should therefore have liked to have seen my home country, Sweden, being able to join with Greece today.

  Koulourianos (GUE/NGL). – (EL) Mr President, ladies and gentlemen, our reservations about Greece’s accession to EMU are not a matter of principle; they are based on actual facts, as regards both EMU in general and the Greek economy. As far as EMU in general is concerned, we are in favour of real economic and monetary union. Unfortunately, this union is only monetary, not economic. It is MU, not EMU. We know that EMU was created prematurely for political reasons which date back to the events of 1989 and 1990, which is why the child, the euro, has been delivered early and is languishing in an incubator. This is the opinion expressed by the Nobel prize-winning economists Friedman, Tobin and Modigliani. The creation of EMU was not preceded by an agreement on the economic policy which the Member States had to follow. Only now are the Commission and Council trying to outline common policies for certain economic problems such as unemployment and competitiveness. But the road is long and full of adventures, as the poet says.

The Goebbels report tells us that Parliament’s reply cannot but be a political one and assures us that Greece’s accession to the euro zone does not involve any political risk. However, the report adds that there are economic risks and that they are greater in the case of Greece than in the case of other countries belonging to the euro zone. We agree. There is no danger to the economies of the other 14 Member States. Of course, I have trouble understanding how anyone can distinguish so easily between political and economic risks, but we shall let that pass.

As far as Greece is concerned, our reservations concern the economic risks mentioned in the report. The sole aim of the economic policy pursued by Greece over recent years has been to satisfy the convergence criteria. Efforts have focused on improving indicators, not real economic quantities. The competitiveness of the economy has not improved and unemployment continues to rise. The structural changes needed have not been carried out and privatisation has been presented as the new panacea for development and prosperity. Wage differentials have been sacrificed to indicators and are increasing, and, as a result, the figures are doing well while the people are suffering, however.

In all honesty, the Goebbels report says that, as regards convergence, all EU governments are required to produce results but are free to choose the means of achieving it. It is therefore the Greek government’s choice of means which we object to. The means chosen were neither economically suitable nor socially just. The rich got richer and the poor got poorer. In joining EMU, we are jumping in at the deep end and hoping for the best.

  Collins (UEN). – Mr President, firstly my congratulations to Mr Goebbels on a very professional report and an excellent presentation. Some government finances are indispensable prerequisites for economic stability and economic progress. Securing budgetary discipline strengthens price stability and creates conditions which are conducive to creating much needed employment within the territories of the Union.

The Stability and Growth Pact States provide the 15 Member States of the Union with a comprehensive surveillance procedure to monitor their budgetary policies. The Stability and Growth Pact calls for Member States to reach, in the medium term, a budgetary position close to balance or in surplus. It must also identify the adjustment pacts adopted to reduce the general government debt ratios.

The Commission and Parliament monitor submissions made by each Member State of the Union to ensure compliance with the Stability and Growth Pact. We must also remember that there are wider provisions for closer coordination of economic policies in general between the Member States of the Union. The principle of the Stability and Growth Pact is also a logical progression from the criteria laid down in Maastricht for the Member States to comply with economic conditions for participation within the new European single currency.

The one comment I would like to make about the state of the single European currency is: Why do so many Member States want to join such a regime? It is clear that Greece will shortly join the existing 11 Member States who are participating in the economic and monetary union, and I wish to congratulate Greece on its economic recovery and wish it well in the future. I welcome Greece into the euro zone.

It is also clear that Sweden and Denmark will accede to the single European currency regime over the next couple of years. It is known that the vast majority of countries from eastern and central Europe want to sign up to the process of economic and monetary union in as short a time as possible, but I believe that the European Central Bank has to outline a clear strategy as to how it intends to bolster the value of the new euro.

The 290 million citizens within the existing 11 EMU countries have the right to know what the European Central Bank intends to do to maintain and enhance the value of the euro now and into the future.

  President. – We shall adjourn the debate on Mr Goebbels’s report, which will resume at 3 p.m. today, as we are now going to start the voting, which will run from 11.30 a.m. to noon. It will be adjourned for a formal sitting and will resume immediately after the formal sitting. I therefore urge the Members not to leave the Chamber at the end of the formal sitting.

IN THE CHAIR: MRS LIENEMANN
Vice-President