A 20 per cent increase in the value of the euro would be "reasonable", the French finance minister, Mr Laurent Fabius said, following a meeting of the Eurogroup of finance ministers yesterday. An upbeat Mr Fabius said that Commission forecasts of growth for the next two years confirmed the ministers' view that the fundamentals of the euro economy were sound. What pressures there are on the currency are largely external, most notably the price of oil, he said. Mr Fabius's attempt to talk up the currency is unlikely to have any effect.
Ministers approved the issuing of a new index of eurozone activity, specifically of business confidence. The "business climate index" shows a peak in confidence last June followed by a small decline and a stabilisation in October. Last night and today ministers return to the vexed issue of the elusive tax package which has bedeviled them and summits since 1997. The three-part package involves controversial proposals on the taxation of non-resident savings accounts originating in the late 1980s, a code of conduct on corporate taxation, and provisions for the taxation of royalties.
The last two are now uncontroversial, even in respect of Ireland which has accommodated the code of conduct by progressively reducing its company taxes to a common level.
But, despite a breakthrough at the Feira summit this summer, where general political agreement was reached on the principles underpinning the savings tax, Luxembourg, largely on its own, is again holding out on the detail. The frustration of many ministers on the issue is evident with many linking the stalemate to treaty reform of the veto at the Nice summit. Mr Fabius said "all these things are too complex to be resolved by unanimity and it makes me all the more convinced of the need for qualified majority voting."
The Luxembourg Prime Minister, Mr Jean Claude Juncker, said it was "another reason why unanimity should be kept".
Under the savings tax proposal, countries could choose during a seven-year transitional period, starting in 2003, either to share information on non-residents' savings income or tax that income. At the end of the period, exchange of information between tax authorities would become the norm.
Among the issues still in dispute are:
the rate of any transitional withholding tax, with most countries pushing for 25 per cent and Luxembourg holding out for 10-15 per cent;
how any tax revenue should be shared between the state where the money is deposited and the home country of the depositor -75-25, says Luxembourg, 10-90, say the rest;
whether interest earned by fixed-income and money market investment funds should be taxed;
whether, as Luxembourg insists, the tax paid represents a final settlement of tax liability (liberatoire in the jargon), or whether national tax authorities can take more;
and to what extent already issued bonds should be excluded, a concept known as "grand-fathering".
If they fail to agree, Ministers will meet in Nice on the eve of the summit on December 6th. This is Budget day in the Republic and will cause difficulties for Mr McCreevy.
They are due today also to consider changes to majority voting on economic and monetary union (EMU) issues, including over EU treaty provisions to come to exchange rate agreements and to transfer more bank supervision powers to the ECB.
They will also review proposals to speed up the adoption of legislation in the financial services area and judge the latest budgetary plans of Germany, the Netherlands and Finland.
