EC AGREES ON NEED TO STRENGTHEN EMS
European Community (EC)
finance ministers and central bankers agreed on the need for
greater cooperation to strengthen the European Monetary System
(EMS) against international market turbulence, officials said.
    "There was a general will to reinforce the European Monetary
System, with all that implies," Belgian Finance Minister Mark
Eyskens said yesterday after hosting a one-day session of
informal talks at this Belgian coastal resort.
    The gathering was the first such discussion since the
second major realignment of EMS parities within nine months in
January.
    The system has come under severe strain as funds have
flowed out of the slumping dollar and into the dominant EMS
currency, the West German mark, sending it soaring against
weaker currencies in the system.
    But Eyskens said February's agreement between leading
western industrialised nations to stabilise exchange rates at
around current levels was working and this would allow the EC
to speed up its efforts to boost the internal stability of the
EMS.
    He told a news conference yesterday's meeting agreed on the
need for closer coordination among EMS member governments of
interest rate policies and of interest rate differentials
between different countries.
    They also agreed they needed better coordination of
exchange market intervention to hold currencies stable, both
when they reached their fixed EMS limits and within their
agreed margins.
    But Eyskens said this coordination raised a whole range of
technical problems and ministers would discuss these further in
Luxembourg in June on the basis of proposals from the EC's
Monetary Committee and Committee of Central Bank Governors.
    He said the EC needed a set of indicators of economic
convergence betwen Community countries and it was important
that interest rates fulfilled this role together with exchange
rates and inflation rates.
    The Belgian minister, whose country presently holds the
presidency of the community, made clear the meeting had not
produced any agreement to move radically forward in developing
the EMS towards the EC's long term goal of economic and
monetary integration.
    "We have committed ourselves to reestablishing the normal
functioning of the system," Eyskens said.
    Eyskens has repeatedly stressed that he believes the EMS
has to be reinforced if the EC's plans to liberalise all
movements of capital across national borders by 1992 are to go
ahead.
    EC executive Commission President Jacques Delors told the
meeting the authority would put forward proposals for a final
phase of capital market liberalisation in October that would
include safeguard clauses for member countries for which the
move would create difficulties.
    Eyskens said the ministers and central bankers also
discussed the need to "dedramatise" realignments of EMS parities
by letting high-ranking monetary officials carry them out by
telephone rather than calling a meeting of finance ministers.
    However, West German sources said Bonn Finance Minister
Gerhard Stoltenberg was unenthusiastic about the idea.
    British Chancellor of the Exchequer Nigel Lawson told
journalists that one of the technical issues raised by greater
coordination of exchange market intervention was the question
of which currencies should be used to intervene and held in
central bank reserves.
    He said several EMS member countries believed the EMS would
work better if central banks held each other's currencies -- an
issue of particular importance regarding West Germany since the
Bundesbank holds only dollars in its foreign exchange reserves.
    He said the debate on dedramatising EMS realignments
reflected a general feeling among participants that the way the
January reshuffle had been conducted was unsatisfactory.
   The realignment was marked by acrimony between France and
West Germany, with each side blaming the other for strains in
the system that forced the parity overhaul.
 REUTER
