Europe pressed to ease euro criteria

  • By Taimur Ahmad, Phil Thornton
  • 15 May 2009
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Pressure on the European authorities to relax the criteria for membership of the single currency for crisis-hit eastern European countries was mounting yesterday from IFI officials, east European nations and leading economists.

The European Commission and the European Central Bank are resisting calls to relax the so-called Maastricht criteria for euro entry. Policy-makers fear weakening the criteria would damage the credibility of the euro.

But Marek Belka, director of the IMF’s European department, told Emerging Markets that the entry procedure had to be clarified. In “turbulent times”, the two-year waiting period in the exchange rate mechanism (ERM2) is “obviously debatable”, he said.

The entry criteria are “not clear”, Belka argued. “Criteria have to be met in a sustainable way. What is sustainable? It always entails arbitrariness, so it has to be made clear for some of the countries in the region, what does it really mean – sustainable or unsustainable,” he said.

“If the strategy is unclear then the programme of economic policy becomes vulnerable, and the political consensus that is needed to support a difficult programme can suddenly collapse.”

Willem Buiter, an economics professor and former chief economist of the EBRD, said eurozone entry should be a top priority for new EU member states. “What in many causes are ludicrous entry requirements” should be waived, he told Emerging Markets. This would remove the threat of destabilising swings in their currencies.

They would still have debts and banking sector problems, but would have one less problem to deal with. “It would be an obvious no-brainer.”

Aspiring eurozone members have to keep inflation within 1.5% of the average of the three best performers; limit the government deficit to 3% of GDP and the government debt/GDP ratio to 60%; maintain membership of the exchange rate mechanism currency band for two years; and keep long-term interest rates within 2% of the average of the three lowest rates.

On Wednesday the Commission initiated excessive budget deficit procedures against Poland, Lithuanian and Romanic after those countries breached the 3% deficit rule.

Erie Berglof, EBRD chief economist, said Brussels was right to stick to its criteria “If you change the rules of the game that has a fundamental implication for the euro.”

East European political leaders and bank officials criticised west European inflexibility on the eurozone. Lithuanian prime minister Andrius Kubilius called for “a more co-ordinated and positive approach to the expansion of the eurozone”. He told Emerging Markets: “There needs to be some kind of special programme to achieve this expansion ... a case by case basis is not enough.”

In May 2006, the European authorities rejected Lithuania’s bid to adopt the euro after it missed the inflation target by a hair. The EC’s decision has opened up old wounds, as the country has been deprived of much needed liquidity and borrowers faces costly exchange rate risks.

This has heaped on concerns that the Maastricht criteria could, in theory, demand deflation in the economies of eurozone candidates. Latvia central bank governor Ilmars Rimsevics told Emerging Markets: “I believe that negative inflation is also bad, therefore, that negative inflation would be judged with a separate yardstick.”

  • By Taimur Ahmad, Phil Thornton
  • 15 May 2009

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 13 Mar 2017
1 JPMorgan 94,925.33 384 8.39%
2 Citi 87,531.58 331 7.74%
3 Bank of America Merrill Lynch 84,341.49 288 7.46%
4 Barclays 75,288.19 241 6.66%
5 Goldman Sachs 68,504.71 208 6.06%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 16 May 2017
1 Deutsche Bank 19,381.65 47 8.82%
2 Bank of America Merrill Lynch 18,968.25 36 8.63%
3 HSBC 18,103.95 50 8.24%
4 BNP Paribas 8,911.57 55 4.05%
5 SG Corporate & Investment Banking 8,885.00 54 4.04%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 23 May 2017
1 JPMorgan 8,714.26 35 8.36%
2 UBS 8,283.47 33 7.95%
3 Goldman Sachs 7,736.57 37 7.42%
4 Citi 6,897.11 46 6.62%
5 Bank of America Merrill Lynch 6,215.31 24 5.96%