The German Finance Minister, Mr Oskar Lafontaine, and his French counterpart, Mr Dominique Strauss-Kahn, warned yesterday against an overvalued euro and called for the introduction of "general guidelines" to limit fluctuations in the exchange rate between the euro and the dollar.
The finance ministers' joint memorandum was published simultaneously in the German weekly Die Zeit and the French daily Le Monde, hours before Mr Lafontaine hosts a meeting of European and Asian finance ministers in Frankfurt today and tomorrow.
The memorandum welcomes the successful launch of the euro and notes what it calls a "philosophical convergence" among 13 of the 15 European Union governments that include Socialists or Social Democrats. All these governments acknowledge the power and value of the markets, according to the finance ministers, but they agree that governments have an important role in regulating the free market.
"They also agree on the need to protect price stability and budgetary solidity but they do not allow stability to pass as an excuse for governments and central banks to overlook their role in managing economic growth or their responsibility for employment," the memorandum says.
Mr Lafontaine and Mr StraussKahn call for a "macroeconomic policy mix" to support non-inflationary growth in an atmosphere of social harmony and fairness. In this context, the memorandum calls for the co-ordination of taxation in Europe but stresses that tax must remain a national responsibility.
Nevertheless, the finance ministers predict that, in an enlarged EU, tax policy will be decided by qualified majority voting.
Their call for measures to ensure that the euro does not become overvalued is unlikely to receive an enthusiastic hearing at the European Central Bank (ECB) headquarters in Frankfurt. The president of the ECB, Mr Wim Duisenberg, will have an opportunity to reply today when he addresses 25 finance ministers from Europe and Asia on the latest developments in the introduction of the euro.
Other speakers at the two-day meeting include the Director of the International Monetary Fund, Mr Michel Camdessus.
