Indeed the Austrian prime minister Viktor Klima who chaired the meeting summed up by saying that economic policy co-ordination is our over-reaching aim
Indeed the Austrian prime minister, Viktor Klima, who chaired the meeting, summed up by saying that “economic policy co-ordination is our over-reaching aim”.
Two measures on the table present direct, practical problems. Although signed up to the battle against “harmful” tax competition, Britain is opposed to the so-called withholding tax. This measure, designed to prevent citizens of one EU country avoiding tax by investing in another, would deduct 20 per cent tax from the interest of all savings. The Chancellor, Gordon Brown, has threatened a veto on the grounds that it would devastate the Eurobond market based in the City.With Brussels refusing to offer an exemption to eurobonds, the issue will reach a crescendo in the run-up to the heads of government meeting in June.
Anything short of a full-blooded veto will provoke an outcry from the Eurosceptic press.Meanwhile a European code of conduct committee, chaired by the Treasury’s Dawn Prim-arolo, may rule some British tax breaks – including one to help the film industry – out of order. The momentum towards long-term tax co-ordination will be kept alive by a study of company taxation throughout the EU. And, during the second half of the year, there may be an attempt to scrap the veto on tax policy altogether at the EU’s Inter-governmental Conference.Finally there is the issue which Jacques Santer, European Commission president, likened to the Loch Ness Monster for its ability to keep resurfacing: duty-free. Despite a unanimous decision seven years ago to scrap duty- free in the summer of 1999, lobbying has kept the issue alive. Ministers will examine it one more time, though the Danish finance minister is threatening to resign (and bring down her government) rather than save duty-free. Drink cheaply while you can because any reprieve is likely to be brief..
GERMANS are bracing themselves for a great deal of uncertainty in the coming year. The new government, still apparently unclear about its economic priorities, will be moving to Berlin after the summer. However well planned the project has been, disruptions are inevitable. This comes at a time when the nation which almost defines itself by its currency tries to get accustomed to the euro.
Besides the pyschological impact of all these novelties, the economy will be put under strain by global developments. 1998 was the year when Germany, defying all predictions, shook of the effects of the Asian crisis. In 1999, the forecasters say, German industry will no longer be able to shrug off increased competition in Asia and collapsing markets in Russia and Latin America. While some industries, notably car manufacturing, will hardly notice the difference, others, such as chemicals and engineering, are set to take a beating.
The country’s spectacular export-led growth will be hit as exports are not expected to maintain last year’s frenetic pace.
The prestigious IFO institute, for instance, predicts a growth rate of 1.7 per cent for 1999, in contrast to the 2.8 per cent achieved last year. The slowdown will be barely noticeable in the east, where the economy expanded by about 1.8 per cent in 1998, and might drop to 1.5 per cent in the coming year. In the prosperous west, though, growth is expected to drop from 2.9 per cent to 1.7 per cent.These figures assume that capital investments are maintained at their present moderate levels, and that the current mini-boom in the consumer market – fuelled largely by the diversion of savings – will continue into next year It is not a very rosy outlook, but it could have been worse. Despite the slowdown, forecasters are expecting a slight fall in unemployment, perhaps by 250,000, bringing the number of jobless to about 4 million by the end of 1999.