27 February 1998

Single currency has big benefits – at right time

By Jonathan Riley

A SUCCESSFUL single currency would have substantial potential benefits, but the UK should join only when conditions are right for industry, according to government.

Junior farm minister Lord Donoughue told farmers weeklys Economic and Monetary Union conference in London that selecting the right time to enter the single currency was critical. And he revealed a set of five negotiating points to be met before joining.

The single currency must :

lAvoid discrimination between member states and be fair to British farmers, traders and consumers.

lCut the systems high cost to consumers and taxpayers.

lMinimise competitive and marketing distortion.

lBe simpler and transparent.

lMeet the EUs international obligations.

But, he warned, sitting on the periphery for too long posed considerable dangers. "The start of the single currency arrangements will mean a thorough overhaul of the EU agrimonetary arrangements."

The agrimonetary system determines the rate at which CAP support prices are fixed in ecus before conversion to national currencies.

The 11 countries expected to adopt a single currency in the first wave would no longer need this mechanism. And he warned that they may insist on measures to stop the system benefiting the member states not taking part. They could also agree to award themselves compensation to smooth the transition into the single currency, said Lord Donoughue.

For the non-joiners – probably Greece, Denmark, UK and Sweden – arrangements would still be needed to convert ecus to national currencies. Those arrangements would be crucial, he said.

"Currently we benefit from the freezing of green rates which cushions the effect of a strong currency on the value of CAP subsidies.

"This freeze has been worth £400m to UK farmers over the past two years. Member states joining the single currency face an unfreezing of rates and could demand parity with those still gaining," he said. He argued that it was vital that the UK was included in these negotiations to defend the national position.

Germanys EU commission representative, Rolf Kaiser, said that despite a big stumbling block in the shape of tax declarations, preparations for a single currency were already well underway in Germany.

"There was a clear change in peoples minds in Germany about nine months ago when they stopped taking a defensive line and looked to the opportunities of a single currency.

"Even down to product labelling, changes are being made and catalogues will be produced with product prices in euros this year."

Junior farm minister Lord Donoughue unveiled a five-point negotiating stance to be met before the UK joins EMU.

EMU plans are well underway in Germany, according to German EU commission representative Rolf Kaiser.