It could be decades before European tax rates are harmonised and they may never fully converge, according to the president of the European Central Bank (ECB). Mr Wim Duisenberg was speaking in Frankfurt last night after a meeting of the bank's Governing Council.
The Governing Council did not discuss tax harmonisation but Mr Duisenberg said that he personally believed it would eventually take place. "I regard it as something that could happen over time. But when I say over time, it could take decades, as tax rates in different countries move closer together and may never become exactly the same," he said.
With just one month to go before the euro is introduced, yesterday's meeting was dominated by technical matters. The Governing Council will meet again on December 22nd for what is likely to be the final opportunity to agree a common interest rate for the euro area. Mr Duisenberg hinted that the ECB may set a low rate, given that prices in Europe are stable and economic growth is expected to slow down in 1999.
The bank is less worried about inflation than about a decline in consumer confidence that could damage domestic demand. "The risk is on the down side rather than the upside," Mr Duisenberg said.
However, he rejected demands by Germany's Finance Minister, Mr Oskar Lafontaine, for an interest rate policy geared towards creating jobs.
"Of course, monetary policy and fiscal policy have something to do with employment policy. But the best contribution that monetary policy can make to economic growth is to create a stable climate `a climate of price stability'," he said.
Mr Duisenberg dismissed complaints that the ECB is secretive and remote, claiming that it is, in fact, the most open Central Bank in the world. He hoped that the people of Europe would greet the euro on January 1st 1999 "with hope and enthusiasm". "What we hope to inspire is that as we approach that date and from that day onwards they look to the future with confidence, confidence in their own future and in the European Central Bank," he said.
