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16 April 2024

Leaders warn pact could create two-speed Europe


Central European states have given a cool reception to a Franco-German proposal for a eurozone competitiveness pact, pointing to the risk of a two-speed Europe, even though few are in any rush to adopt the single currency.

Leaders of the 17-member eurozone will hold a special Brussels summit on March 11 on the proposed pact aimed at reinforcing policy coordination at a time when the bloc is battling a debt crisis.
The move has raised eyebrows among the 10 EU members who are not yet a part of the euro club and have not been invited to attend the summit.
This is particularly the case in Poland, Central Europe's heavyweight.
Prime Minister Donald Tusk has warned against the proposed pact "leading to a return to a two-speed Europe."
European budget commissioner Janusz Lewandowski, a fellow Pole, recently echoed him.
"We are almost on the path of a two-speed Europe," Lewandowski said commenting on the proposed eurozone pact.
Countries which have not yet joined the eurozone "must try to keep the door open, to be part of the decision-making mechanisms," he said on a recent visit to 2007 EU entrant Bulgaria.
"After being integrated, we cannot tolerate being excluded once again because the eurozone is constructing some kind of internal structure," he added.
For now, Poland appears to be in no hurry to join the zone plagued by a debt crisis.
Deputy finance minister Ludwik Kotecki has suggested 2015 as "the first possible date, but not the most likely one" to adopt the common currency.
But 2020 seems a "more likely" target according to Professor Krzysztof Rybinski, head of the Warsaw-based University of Economics and Computer Sciences.
"Poland still has a lot of work to do to meet Maastricht criteria" of macro-economic prerequisites for eurozone entry, he told AFP.
"Being outside the eurozone allowed Poland to survive the (global economic) crisis," due to a market-driven devaluation of its currency buoying exports, observed Poland's central bank president Marek Belka.
"But politically, it is no good" to be outside the single currency bloc, he insists.
Struggling to overcome its public debt and economic crises, Hungary's Prime Minister Viktor Orban is also loath to name a target for euro adoption.
In the Czech Republic, setting a eurozone entry date is also tricky. Right-wing Prime Minister Petr Necas said he has no intention to peg a date during his mandate which ends in July 2014.
Necas recently agreed that a number of the proposals made by Berlin and Paris in the areas of pension reform and limits on public debt are steps in the right direction.
"On the other hand, the idea of harmonising direct taxes is clearly a move in the opposite direction when it comes to the competitiveness of the Czech Republic, hence we find this idea very hard to accept," he said.
A eurozone member since 2009, Slovakia has joined the camp slamming the competitiveness pact. According to centre-right Prime Minister Iveta Radicova, economic policy harmonisation "has its limits."
Meanwhile, the eurozone's newest member, the tiny Baltic state of Estonia which joined at the New Year, has voiced optimism over the Franco-German proposals.
"These opportunities must be used in full to promote sustainable budgetary policies and necessary structural reforms in support of improved competitiveness," Jurgen Ligi, Finance Minister of Estonia told AFP.
With its lat currency pegged to the euro, neighbouring Latvia is optimistic about the proposed pact but is also keen to be involved in eurozone decision-making.
"From my point of view, this plan is in some aspects very important because of course France and Germany are very important players," Latvia's Foreign Minister Girts Valdis Kristovskis told AFP recently.
"But at the same time, we are very interested in participating in the decision-making process which is related to the stability and the power of Europe," he said.
Hoping to adopt the euro by 2014, neighbouring Lithuania has also termed the proposed pact "positive".
"All initiatives which bolster European Union competitiveness are welcome," Mykolas Majauskas, a senior finance and economic advisor to the Lithuanian prime minister told AFP. But he also insists the club of "17 must remain open."