MNI BRUSSELS WATCH: Ministers Set For Cautious Debate on EMU

--Debate Still Lacks Consistency At Ministerial Level

--No Clear Outcome Expected This Week

By Jean Comte

     BRUSSELS (MNI) - European Union finance ministers will hold a debate Friday

on the deepening of the Economic and Monetary Union -- the sets of rules and

institutions related to the euro currency.

     The topic has recently gained new importance, following the publication of

a "reflection paper" by the EU Commission, and the start of a debate on the need

for a "European monetary fund".

     But the ministers' discussion, set to happen only shortly before the German

elections, is not likely to deliver a decisive outcome. The discussion paper,

obtained by Market News, acknowledges that "the debate on the deepening of the

Economic and Monetary Union has been going for some time," but does not

introduce any new ideas.

     Using very cautious language, the document stresses the need for

"convergence" of the EU economies, the ongoing work on risk reduction in the

banking sector, and the necessity of securing the "democratic legitimacy" of the

euro area. Precise institutions are not explicitly referred to.

     According to the document, the ministers' debate is expected to focus on

whether "rules" or "institutions" should prevail in the future of EMU -- a soft

way to ask how much flexibility should be given to the EU Commission in

interpreting the rules on public debt and deficit. 

     Ministers will also discuss "intergovernmental arrangements" -- an

expression that refers to the European Stability Mechanism, and its current "out

of the treaties" status.

--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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