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Embargo: 00:01 Thursday 1 May 2008
Contact: Owen Williams 020 7219 8659

LORDS EU COMMITTEE ASSESS THE PERFORMANCE OF THE EURO 10 YEARS AFTER THE CREATION OF THE EUROPEAN CENTRAL BANK

The House of Lords European Union Committee have today published a report on the performance of the euro and state that it is still too early to make a final judgement on the currency's resilience and future prospects.

The report, from the Lords European Union Sub-Committee on Economic and Financial Affairs, comes ahead of the 10th anniversary of the creation of the European Central Bank on 1 June. The conversion rates for the original eurozone participating countries were set at the end of 1998.

The Committee argue that the euro has managed to avoid the fate predicted by many that the currency would become a victim of financial speculation which would lead to a quick collapse. They assert that the euro has contributed to economic development and low inflation in the eurozone and has been beneficial to trade both between eurozone countries and between eurozone and non-eurozone EU countries.

The Committee do however point out that it is too early for a final assessment of the currencies performance particularly as it has so far enjoyed a relatively benign economic climate. They argue that the real test of the currencies durability may come in the next few years as growth in the world economy slows.

While praising the performance of the euro and the ECB the Committee make clear that it would be inappropriate to move towards any central co-ordination of Member States budgets. They argue that while such a move might be theoretically desirable in terms of promoting monetary union and would contribute to the stability of the euro it is politically unrealistic. The Committee state that the fact that no further integration of fiscal policy was suggested for inclusion in the Treaty of Lisbon suggests that eurozone members do not see a pressing need for any fiscal integration. They therefore oppose calls for any supra-national co-ordination of fiscal policies.

Commenting Baroness Cohen of Pimlico, Chairman of the House of Lords EU Sub-Committee on Economic and Financial Affairs, said:

"Before the euro's introduction predictions of its future ranged from the wildly optimistic, that the euro would produce growth in Europe outstripping other regions to the doom mongers who predicted the currency would collapse in a wave of financial speculation - neither has proved correct.

"What we can say is that so far the euro appears to have had an impact on increasing trade between EU members, both those within and outside of the eurozone. The currency has also stimulated integration in European capital markets.

"It is too early to make a final judgement on the durability of the euro the evidence so far seems to suggest it has been a robust and effective currency. It will be interesting to see how it performs as the world economic outlook changes."

Notes to Editors

  1. The report The euro, is published by The Stationery Office, House of Lords European Union Committee (Sub-Committee on Economic and Financial Affairs), 13th Report of 2007/08. HL Paper 90.
  2. The report will be available online shortly after publication at:
    http://www.parliament.uk/parliamentary_committees/s_comm_a/s_comm_a_reports_and_publications.cfm

For copies of the report or to request and interview with Baroness Cohen, please contact Owen Williams, Committee Press Officer, on 020 7219 8659.