French attack 'secretive and obsessive' euro bank Larry Elliott, economics editor Thursday January 24, 2002 The Guardian
Government backing for an early referendum on the euro was thrown into fresh doubt last night when two leading members of the French left - including Europe's trade commissioner - launched a strong attack on the European Central Bank and urged that it be remodelled along the lines of the Bank of England. With the introduction of euro notes and coins intensifying speculation about UK membership of the single currency, a pamphlet co-authored by Pascal Lamy - a senior member of the European Commission in Brussels - echoed the misgivings of UK policy makers about the structure and conduct of the ECB. Mr Lamy and Jean Pisani-Ferry, an economic adviser to French prime minister Lionel Jospin, said the ECB should be less inflation obsessed, less secretive and more accountable for its actions. The outspoken criticisms of the ECB provide support for the chancellor, Gordon Brown, who believes that the model of central bank independence established by Labour in 1997 delivers better economic management than that for Europe's central bank which was enshrined in the Maastricht treaty in 1991. But while the high-level call for reform from within the eurozone is certain to be seized upon by those opposed to UK membership, supporters believe that any signs of a willingness to change could make it easier for the government to sell the euro to the public. The ability of the government to influence the public mood on the euro was reflected last night in a survey from the City firm Barclays Capital, which found that for the first time in its tracking poll a small majority would vote yes in a referendum if the government said that the five economic tests laid down by Mr Brown in October 1997 had been passed. The treasury will make an assessment of the five tests before June next year, and the performance of the ECB is likely to be important in deciding whether a "clear and unambiguous" case for joining has been made. In their pamphlet, The Europe we want, Mr Lamy and Mr Pisani-Ferry, say that the ECB's structure was determined by the need to reassure the German public that it would be as tough on inflation as the Bundesbank. Mr Lamy and Mr Pisani-Ferry, both writing in a personal capacity, also argue that the ECB should copy Britain's sytem of having the governor of the central bank write an open letter should inflation deviate too far from its target, and that the minutes of ECB meetings should be published once a quarter. The call for reform of the ECB came as a senior policymaker at the Bank of England criticised the Frankfurt-based institution for being too slow to react to the downturn in the world economy last year. In a speech to economists in Austria, Chris Allsopp, a member of the Bank's monetary policy committee, said the US Federal Reserve had convinced the markets that it was willing to cut rates speedily and dramatically when the economy slowed. "Consider what happens in the US when there is news that recession is worse," he said. "There is immediate anticipation that official interest rates will be lowered - so market rates react. This... seems much less well established in the euro area."
