The EMU and euro a success, says commission

THE success of European Monetary Union (EMU) and the euro has produced a strong currency that will remain so in the future, according to the European Commission.

Celebrating the first decade of the EMU, the Commission has produced a report into the successes, failures and challenges ahead for the currency.

Their overall assessment was that it has been a resounding success, providing a stable international currency with a market of nearly 320 million people that has overtaken the US dollar in some areas, including the international bond market and the value of bills in circulation.

Its introduction has resulted in unprecedented price stability, low interest rates that have boosted private and public investment and increased trade through the abolition of exchange costs, the report says.

The euro’s strength has helped shield the EU from the rising costs of oil and food, and will remain strong as the economic fundamentals are good. Living with a strong currency means producing goods that compete on the basis of quality and not just cost, the report argues.

The EMU however must function better to deal successfully with a range of challenges including an ageing population, globalisation, turmoil on the financial markets and rising food and energy prices.

This means the euro zone’s economic policies must be better coordinated and governed as decisions taken in one member state affect other members.

Finance ministers must pay more attention to the euro-wide implications of their proposals than they have in the past when they frequently concentrated on their national interests, according to the report.

In this way ministers’ proposals must be reviewed and tested to ensure they are appropriate to euro countries.

Despite being a major single currency, finance ministers fail to speak with one voice, say the report’s authors.

While having a permanent presidency of the euro-group, as proposed in the Lisbon Treaty would help, the EU should have a seat on the international monetary bodies,

Currently several EU member states have individual seats on these bodies but fail to agree on policies and so their weight is lost, the report recommends.