The President-in-Office of the Council, British Foreign Secretary Robin Cook, told MEPs of Britain's commitment to preparing the way for a successful launch of the euro on January 1st, 1999. EP News looks at the issues involved and the events ahead.
Mr Cook said: "Britain will be in the chair when the crucial decision is made next May. We will discharge this responsibility to the best of our abilities, fully and scrupulously in a way that shows Europe's constructive approach at its best. We want Economic and Monetary Union to be a success."
"Britain itself will not be in the first wave, but that does not mean that we have no interest in the success of monetary union. Our economy is bound up in that of the Continent and we have every reason to work for a successful launch."
Meanwhile, Parliament this month approved several key reports designed to smooth the way for the introduction of the euro.
MEPs recognise that the euro will have a profound effect on Europe's capital markets. With France, Belgium, the Netherlands and Germany deciding to convert existing debt and new issues in euros as from January 1st, 1999, this will act as a boost to creating a unified European bond market. The euro can also expect to grab a slice of international trade at present largely undertaken in dollars.
MEPs also supported the Friedrich report, calling for a relaxation of national rules on private pension-fund investment, to facilitate investment in the new euro-zone. Mr Friedrich also pinpointed the need for the removal of tax distortions, the unification of Europe's stock markets and the introduction of a single EU company law. In fact, EU finance ministers - normally the most reluctant of government leaders to agree binding rules on financial issues - have recognised the forthcoming impact of the currency by agreeing a voluntary code on taxation. And international investment advisors such as Moody's are already forecasting that the establishment of monetary union will lead to a considerable increase in cross-border financial transactions and mergers. Prospects are particularly bright for the institutional and retail banking services.
The introduction of the new currency will first affect financial institutions and large firms rather than consumers. Non-cash transactions, including electronic transfers of money, direct debit and credit card payments, can be denominated in euros as from January 1st, 1999. It will also lead to the creation of a single market in financial services in the eurozone. This will mean an increase in crossborder banking and other financial products such as insurance policies and mortgages. It is possible that financial institutions will offer loans and mortgages in euros during the transitional period.
It is also expected that a stable currency will bring about lower interest rates here and in Britain, although this does not mean they will necessarily be passed on to borrowers. Banks and financial institutions are well aware of the need to maintain competitive rates to attract savers.