§ Lord Norrieasked Her Majesty's Government:
What was the outcome of the meetings of the Economic and Finance Council (both formal and informal) since 1st September.
§ The Parliamentary Under-Secretary of State, Scottish Office (Lord Strathclyde)Members of the Economic and Finance Council met informally on 7th-8th September in Rome and formally in Luxembourg on 8th October. On both occasions the Chancellor of the Exchequer represented the UK, with the assistance of the Financial Secretary at the October meeting.
The September meeting concentrated on a discussion of economic and monetary union during which the Chancellor of the Exchequer gave a full explanation of the British proposals for a gradual evolutionary approach through the establishment of a common currency, known as the "hard ecu", and a European Monetary Fund. A majority of member states shared our view that much greater economic convergence in the Community was a necessary condition for further monetary integration, and that it was therefore undesirable to set a premature date for moving beyond Stage One of EMU. The Chancellor of the Exchequer stressed the importance of ensuring that all member states could move forward together. The Chancellor of the Exchequer explained that our proposals would allow for that while providing a strong anti-inflationary discipline and giving people 718WA and businesses the opportunity to choose which currency they wished to use. It was agreed that there was a need for further analysis of our proposals both before and during the forthcoming Intergovernmental Conference.
The consequences of the Gulf crisis were also discussed and the Commission put forward proposals for aid to those front line states which were suffering as a result of the crisis. No decision was reached. It was agreed, however, that the resulting rise in oil prices should not be accommodated by relaxing either monetary or budgetary policies and that the increase in oil costs should not lead to higher wage settlements or product prices.
At the October meeting, the entry of the United Kingdom into the Exchange Rate Mechanism of the European Monetary System was widely welcomed. Economic and monetary union was again discussed both during the Council and at an inter-institutional meeting beforehand with the European Parliament. There was a growing consensus that more economic convergence was indeed needed before the Community moved beyond Stage One and that objective criteria to determine the timing of such a move should be considered. The Presidency will be reporting on progress with preparatory work on EMU to the European Council on 27th-28th October. The Chancellor of the Exchequer expects discussions in ECOFIN and the monetary committee to continue.
There was a brief discussion of the Commission's proposals for VAT and excise systems after 1992 and for raising travellers' allowances on duty paid goods in preparation for the single market. The consequences for the Financial Perspectives of German unification and the Gulf crisis were also considered. The Money Laundering Directive was discussed. The majority of member states shared our concerns that the present draft appeared to extend the competence of the Community into the field of criminal law but it was hoped that this problem could be resolved so that the directive could be agreed before the end of the year.