French stress sovereignty within EMU

 

French politicians have used two main arguments to "sell" EMU to the public. The Socialist Prime Minister, Mr Lionel Jospin, emphasises that the single currency will create jobs and economic growth, while President Jacques Chirac talks, in Gaullist overtones, about the projection of power and successful competition against the US.

The French are meant to believe that their best hope of retaining France's historical importance in the world is within a united Europe. Moreover, Paris hopes EMU will provide what the foreign minister calls "a federating shock" in areas where integration has been slow - in social, foreign and defence policies.

As the Russian economy collapses, a new argument has emerged.

EMU has sheltered France from economic chaos, the Finance Minister, Mr Dominique StraussKahn, keeps repeating. In a frontpage opinion piece in Le Monde, the economist Mr Jean-Paul Fitoussi put it this way: "The creation of the single currency has strengthened the actual sovereignty of (the 11) governments. This is how we must interpret the fact that the financial crisis has not led to speculation against European currencies. . . The single currency frees governments from subjugation to currency markets. . . We live in a world dominated by deflationary tensions from the crises shaking Asia (especially Japan), Russia and Latin America. The euro is appreciating in relation to all currencies in the world, including the dollar."

Had the events of this autumn occurred before the euro was launched last May, there would have been a run on the deutschmark and more fragile currencies - including the franc - would have suffered, Mr Philippe Sigogne, the director of analysis at Mr Fitoussi's economic studies centre, the OFCE, says.

"The euro prevented that." As it happens, the Italian lire deviated from its normal rate against the deutschmark only briefly. The Swedish and Danish currencies - which are not in EMU - lost value. But even the magic charm of the euro, Mr Sigogne cautioned, will not protect economies if bankers lose huge amounts of money in Russia and emerging markets.

Despite the international crisis, a modest French economic recovery continues, and the public associates prosperity with the euro. The French consumer confidence index is at its highest rate since 1987. Unemployment has fallen from 12.4 per cent in 1997 to 11.8 per cent, and is expected to reach 11 per cent by the end of next year. The finance ministry predicts 3 per cent growth this year.

Against this positive backdrop, the euro is becoming part of daily life. Monthly bank statements give balances in euros as well as francs, and many consumer items - from newspapers to yoghurt - are already priced in both currencies. Twenty-two French cities have put euros into circulation for short periods.

Pocket calculators that convert francs to euros are sold with news magazines and by students on Paris streets. Economists say small and medium sized companies are technically ill-prepared for the transition, but they should catch up.

Last May's battle for the presidency of the European Central Bank showed how stubborn Paris can be when defending what it sees as French interests in EMU. Perhaps the most difficult outstanding issue is the role of the "Conseil de l'euro" or "Euro X" council, composed of the finance ministers of the 11 EMU countries and established at French insistence.

Germany strongly opposes what it sees as political meddling in monetary policy. However, the French believe that since the 11 have a single monetary policy, they must co-ordinate it with 11 different economic and budgetary policies. Only an active Euro X, Paris says, can avoid such problems as disparities in public deficits or a drift towards competitive policies.

Mr Pierre Moscovici, the Minister Delegate for European Affairs, has said the very future of the EU could depend on the ability of Euro X to work smoothly with the European Central Bank and ECOFIN, which includes the finance ministers of all 15 EU countries.

Mr Strauss-Kahn took EMU one step further last month when he said the 11 countries of "Euroland" must have a spokesman to represent them, for example, in G7 meetings or in talks with the US treasury secretary. He suggested that the countries with "the most practice in this area" take the job in turns.

Ratification of the Amsterdam Treaty is the last hurdle before complete French adherence to EMU. Because the referendum on the Maastricht Treaty passed by a hair's breadth in 1992, President Chirac has opted for the safer solution of joint ratification by the National Assembly and Senate, which together form the parliament.

An initial vote will take place before the end of the year to alter the French constitution, followed by ratification in January 1999. Although the treaty should pass, vociferous opposition is expected from euro-skeptics like the leftist Interior Minister, Mr Jean-Pierre Chevenement and one of his Gaullist predecessors, Senator Charles Pasqua.

A conference on Economic Monetary Union (EMU) and its implications for companies will be held at the Conrad Hotel, Dublin, on October 30th.

"Developing a Winning Marketing Strategy for the Euro-Zone" is being organised by Cranfield University School of Management in association with The Irish Times.

Among the speakers will be Mr Pat McArdle, head of EMU Planning at Ulster Bank; Mr Brian Mahoney, IT director, Musgrave; Mr David Hopkins, of General Motors Europe; and Mr Ton Ruhe, of Royal Philips Electronics.

The fee is £63;375 and booking forms are available from Ms Helen Fielding, conference co-ordinator, Cranfield School of Management, Cranfield, Bedford, England, MK43OAL. Tel 00-44-1234-754362. Fax: 00-44-1234-750835.