ECONOMY

Greece behind in euro transition

BRUSSELS – The scheduled introduction of the euro on January 1 represents one of the biggest challenges which united Europe has ever faced, and one of the biggest changes ever in all eurozone countries. But will it be an orderly transition to a new era, or will it cause chaos and an orgy of profiteering? In an exclusive interview with Kathimerini, European Commissioner responsible for economic and monetary affairs Pedro Solbes says he is optimistic but also concerned for the outcome of this difficult operation, particularly as regards Greece. He smiles, reflecting on the vicissitudes of geography, which will make this country the last to join the eurozone but the first to put the common currency into circulation. You have made very significant efforts, but started last and data shows that you are below the European average in terms of preparedness, he says. We are watching you closely, continuously urging your government to pay particular attention due to the delay. Preparations should be as comprehensive as possible by December 31, leaving little for completion in the following days and weeks, he adds. Greece should not rest on the knowledge that the drachma will only disappear on February 28, because the longer the delay in adjustment the bigger the problems for citizens and enterprises. He is more optimistic for the rest of the 12-member group. We have done everything possible. A huge effort has been made over several years, the plans have been laid out very well. I believe everything will go smoothly, without surprises. However, he views his position as similar to that of a general on the eve of the big battle: As war theory has it, the best-laid plans occasionally become the first victim. Solbes is not so much concerned about the master plan itself as its actual implementation by the soldiers – i.e. the eurozone’s citizens. He believes that at the final moment of transition, on February 28, there will be no problem. But the aim is to avoid chaos in the meantime, and for this reason citizens should use the euro as much as possible. It’s not easy, but it’s necessary, he urges. The message I want to get across to citizens is that since you will need two or three weeks to fully adapt to the new currency, there is no sense in delaying this adaptation. You will reap no benefit and, on the contrary, you will complicate the transition. Fear of profiteering The biggest fear of all, for both the Commission and for participating governments, remains profiteering, the rounding of prices upward. The commission itself cannot combat this, Mr Solbes notes. It is the citizens who must undertake the initiative for self-protection, comparing prices, being continuously alert and shunning speculators. But how real is the fear of speculation? For the commissioner, the real picture will emerge when the January and February inflation figures are available. Wrong comparisons The European common currency will greatly facilitate comparisons of prices and salaries among the eurozone countries. According to Solbes, this holds the danger of drawing the wrong conclusions and giving rise to equally false pay claims. The euro will in no case bring about an equation of prices and salaries among member countries, for the simple reason that it is not the main factor for existing differences, just as is the case within national boundaries today, he points out. He explains that prices and salaries are primarily influenced by other factors: shop rents, geographical location, or, as regards salaries and wages, the productivity of labor. The euro’s contribution will be to highlight the differentiations in these factors, with regard to productivity and market structure, potentially helping to overcome prevailing distortions. I know there are certain proposals, such as from trade unions for collective labor agreements at European level, but I think this is something illogical. We can do a lot at European level, but wages are a national issue. It is largely a matter of national economic policy, which is associated with the somewhat misleading term Economic and Monetary Union, which includes a single monetary policy but not a single economic policy, even if the Stability Pact does offer a common basis of sorts. Indeed, the fact that the euro is based on 12 different national economic policies is the classic explanation for euro’s weakness against the dollar. For Mr Solbes, the issue of a common economic policy cannot and must not be raised. The 12 face very disparate economic realities, and therefore, need different economic recipes, he says. What is of major importance right now is the eradication of contradictions between fiscal and monetary policy, but also the minimization of decision-making at national level, which has repercussions on the rest of the member states. Mr Solbes points out that if some guidelines of European economic policy have been established, this does not mean that all member states respect them. Our real aim must be that when states make decisions they take into account both the national and Community interest, and how their decisions integrate with those of the other members. I think we can do it and it will be particularly beneficial for the building of Europe, he says. The commissioner thus recognizes something else: The euro still has a long way to go before becoming a currency of truly global reference. Presently, it is a reference currency for only 53 countries, mainly in eastern Europe and Africa, he notes with a slightly apologetic smile. It is used equally if not more than the dollar for bond issues, and has conquered a significant share of international trade transactions, both between eurozone members and third countries, as well as between third countries themselves, particularly when each one of the latter trades heavily with members of the eurozone.