THE designated president of the new European Central Bank laid his cards on the table yesterday by indicating that he would be aiming to keep inflation in the new euro-zone below 2%.
Wim Duisenberg, who is due to take over his new role on July 1, confirmed to MEPs in Brussels that he saw the bank's primary role as ensuring price stability in the 11 single currency members.
''There is a broad consensus among central banks that this can be characterised as a rate of change of the consumer price level comprised in a range between 0% and 2%,'' he told MEPs on the opening morning of two days of public cross-examination of Duisenberg and the five other nominees for the European Central Bank's (ECB) executive board.
The former Dutch central banker, who is determined to guarantee the bank's independence from political interference, rejected French President Jacques Chirac's view that he would retire prematurely halfway through his eight-year term.
He also set out the parameters of the ECB's role when it takes over responsibility for managing the euro from next January.
''Once price stability is achieved and confidence established in a lasting way, then interest rates can be lower than they otherwise would be. That is the only way in which the ECB can support other policies to promote growth and employment,'' he explained.
He categorically denied that pressure to converge interest and inflation rates throughout the EU would lead to intolerable pressures on social policies.
''This process has taken three to four years and in many member states, as governments have got their finances under control, this has led to an increase in employment and restrained behaviour over wages,'' he said.
Duisenberg stressed that the UK, along with the other absentees from the euro-zone - Sweden, Denmark and Greece - would not be left on the sidelines when the ECB comes into operation.
''First of all, they will all be members of the general council of the European system of central banks. We are also in agreement that in most instances they can continue to co-operate in working groups of the European system of central banks and that they will be kept informed as much as possible as we all hope that they will one day all be there,'' he said.
Duisenberg endorsed the Chancellor of the Exchequer's interpretation of the entry requirements to a single currency by confirming that membership of the European Exchange Rate Mechanism was voluntary. He indicated that the real test for sterling would be to demonstrate a stable exchange rate against the euro ''for a considerable length of time''.
He clashed with Euro MPs on several occasions yesterday over the degree of transparency which should accompany the ECB's decisions. The European Parliament believes the minutes of key meetings should be made available as soon as realistically possible as a way of developing public confidence in the new bank.
Pointing to the standard practice of the Bank of England and of the US Federal Reserve in publishing early accounts of their meetings, Labour MEP Alan Donnelly argued that this would ensure monetary policy would be conducted as openly as possible.
The ECB's new head, who had suggested that publication should only take place 16 years after a decision had been taken, rejected the idea. He maintained that the publication since the beginning of the year of the Bank of England's minutes showing where the monetary policy council had been divided had ''undeniably had an impact on markets and had increased uncertainty and speculation''.
''Publication of minutes soon after the decision had been taken will make it more difficult for individual participants in the discussion to change their minds and accept the argument of others,'' he explained.
Duisenberg conceded that publication could take place before his preferred 16 years, but only if their appearance would have no impact on market expectations.
He refused to be drawn on any differences between himself and his five executive board colleagues on the definition of ''price stability'' and of the most effective methods of achieving that target.
But he confirmed that all six had ''discussed, but not co-ordinated'' their replies to the written questionnaire they had received from the European Parliament.
One of the issues which the ECB will have to decide on is whether central banks can impose reserve requirements on commercial banks. Duisenberg pointed out that this was an issue for the new governing council to decide.
But another nominee, Spain's Eugenio Domingo Solans said yesterday that he supported the idea in principle. ''Whether you use them or not is a different question, but they are useful to have in your arsenal,'' he suggested.
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