McCreevy distances himself from socialist line on ECB

The Minister for Finance, Mr McCreevy, is distancing himself and the socialist finance ministers of Europe.

Mr McCreevy repeated yesterday that the European Central Bank is both accountable and transparent enough and that its absolute independence must be guaranteed.

In a reply to a written question from Labour spokesman on finance, Mr Derek McDowell, he added that current arrangements strike an "appropriate balance" between safeguarding the ECB's independence and ensuring it is accountable.

This is at odds with recent public statements from the new German finance minister, Mr Oskar Lafontaine. Moreover, it is understood to contradict a document which the German minister, along with his French counterpart, is planning to bring to an informal meeting of finance ministers in Vienna on Monday, which Mr McCreevy will also attend.

Mr Lafontaine has joined forces with other left of centre ministers, including the French and British, in a bid to increase the openness of the ECB. They hope to use their influence to ensure that the ECB puts an emphasis on employment as well as fighting inflation.

The ministers are understood to have produced a draft document which is likely to call for the greater use of counter-cyclical public spending to prevent recessions and boost employment.

There are also some general proposals on uniform corporate tax rates across Europe, which Mr McCreevy will be keen to argue against.

The document, which has not yet been finalised, will be discussed by a meeting of socialist finance ministers on Sunday evening over dinner. It is then likely to be discussed at the full meeting of finance ministers scheduled for Monday. The left wing finance ministers would like to see more openness on the part of the ECB, on paper the most secretive central bank in the world. The paper, the New European Way, Economic Reform and the Framework for Economic and Monetary Union, may also look for moves towards the Bank of England's system where minutes are published and explanations of decisions are made.

However, our own minister is out in the cold on the issue. Mr McCreevy has not seen the document but he has consistently stressed that the ECB must be independent and that its emphasis on price stability is appropriate.

This position is likely to leave Mr McCreevy isolated within the group of finance ministers. Nine out of the 11 euro countries have left of centre governments, with Spain and Ireland the odd ones out. However, many of the finance ministers come from centrist parties and will not be represented at the advance meeting. This system of socialist ministers meeting was first put in place by the Labour leader, Mr Ruairi Quinn, when he was in office, and it also involves opposition spokesmen attending. As a result, labour finance spokesman Mr McDowell will attend Sunday's meeting along with the UK chancellor, Mr Gordon Brown, and the German minister Mr Lafontaine. According to Mr Jim Power, chief economist at Bank of Ireland, Mr McCreevy should keep his power dry. "There is nothing to be gained from making any comments which may disaffect our EU partners who are mainly centre left. There will be much more important issues to have them on our side and there will be bigger and more important battles," he said.

He added that, while Mr McCreevy's monetary and fiscal purity may impress the ECB, it will not change its attitude to us. The ministers are very unlikely to actually change the terms and conditions of the Stability and Growth Pact which would require unanimity. Sources believe it is far more likely that they will make changes allowing for a mechanism to make capital investments in employment generating areas and other issues relating to economic governance.