12 SEPTEMBER 2001
European Central Bank President Wim Duisenberg is expected to be grilled this week on preparations for the rollout of euro notes and coins, the bank's recent interest rate cut, and the budget problems of key Euro zone members.
Duisenberg will testify before the European Parliament's Economic and Monetary Affairs Committee today.
Monetary policy and the introduction of euro notes and coins in January 2002 are likely to dominate discussions but the ECB chief is also likely to be interrogated on budget matters, even though fiscal policy is the domain of finance ministers.
In particular, Duisenberg will be asked how much leeway there should be for countries to miss the budget goals they set themselves in better economic times and how such slippage might influence monetary policy in the future.
The rate cut and the preparations for the euro will be the main things, but a lot of countries are unlikely to meet their stability programme targets and we will be looking at how much this should be accepted, said Chris Huhne, a member of the committee which will be questioning Duisenberg this week.
Duisenberg may get an easier ride than might have been the case had he testified before 30 August, the day the ECB cut its key interest rate by a quarter percentage point.
Nevertheless he is expected to come in for some tough questioning on whether the central bank is doing enough to protect the euro zone economy from a global slowdown.
Deputies are likely to ask Duisenberg how the central bank reconciles its monetary easing with an inflation rate that remains above its self-imposed ceiling, and why it did not move more aggressively having chosen to disregard the inflation data.
The ECB has eased twice this year, compared to the seven cuts delivered by the Federal Reserve during the same period.
The issue of how the ECB prepares financial markets for its policy moves is also likely to be revived by an audience which has long called for the central bank to publish the balance of votes by which rate decisions are taken.
Inflation could crop up in discussions on the introduction of the euro as public concern mounts that retailers will use the replacement of a dozen national currencies by the euro as an excuse to raise the price of goods and services.
The logistical preparations being made for the changeover, which the ECB is overseeing along with national central banks, will also come under the spotlight, and the concerns of smaller firms are expected to get considerable airplay.
The latest European Commission survey, conducted before the ECB launched its campaign to raise public awareness of the changeover, showed euro zone citizens were still far from familiar with the logistics of the changeover but becoming increasingly concerned about possible price hikes.