Athens Conference: The Euro, the Mediterranean and the Gulf
Regional-European Union, Economics, 2/4/2003

In a presentation he gave yesterday, February 3rd, in Athens in the context of the conference on the "Euro, the Mediterranean and the Gulf ," member of the European Commission Pedro Solbes Mira said that current relations between the European Union and the Mediterranean are intense and multifaceted, ranging from politics, to culture and economics. He indicated three dimensions of the partnerships that are considered particularly important: The Euro- Med. Free Trade Area; Support to economic reforms through the MEDA financial instrument, and the regular economic policy dialogue.

As for the Euro Mediterranean Free trade area, Solbes indicated that it has to become a reality by the end of this decade. A matter which will bring about even greater economic integration between "our respective economies." He added that the first stage of the process towards a free trade area is close to being completed, as Association Agreements have already been signed with eight of the non- candidate Mediterranean partners and negotiations are under way.

He addressed the main actual and potential benefits of the EURO by looking first at private sector participants and then at public authorities in the Mediterranean and the Gulf. Starting with private sector participants, Sobles assessed whether the EURO has been used as a store of value, a means of exchange, and a unit of account.

He said that there is further evidence of the increase use of the Euro in the Mediterranean region. He said that according to the European Central bank, the Eurosystem transported around 8% of the total amount of EURO currency in circulation to destinations outside the EURO area between December 2001 and the end of June 2002, half of which went to the Mediterranean region, including Turkey.

He said that the dominance of the US dollar seems to reflect the intertia of financial systems and the importance of commodity exports for the region, particularly oil in the case of the Gulf countries. This helps to explain the apparent gap between the low eight percent rateof the EURO in Mediterranean exchange rate arrangements, despite significant institutional, financial and trade relations between the EU and the Mediterranean countries.

Concerning the official reserve management, Solbes said that the annual report of the IMF indicates that around 13% of global foreign exchange reserves were held in EUROS at the end of 2001. The corresponding share of the US dollar was 68%; for the Japanese yen the share was 5%. Developments in the Mediterranean region appear to be fairly similar. For instance, Lebanon has increased the EURO's share steadily to around 20% of total reserves since 1999.

Highlighting the impact of the EURO on the Arab states, Solbes said that closer relations with Mediterranean region are a key priority for EU. After enlargement, the Mediterranean will continue to occupy a special position within the context of a broader neighborhood policy, which includes the whole arc of regions around the enlarged European Union.

He indicated that relations with the EU partners in the Gulf will also continue to be developed and strengthened, adding that both market participants as well as public authorities in the region have started to reap some of the benefits from the new currency.

Previous Stories:
  Athens conference on 'Europe, the Mediterranean and the Euro' opens today   (2/3/2003)
  Europe ratifies aid for Syria and lebanon   (11/19/2002)
  Mediterranean forum hails Agadir declaration for creation of free-trade area   (6/1/2002)

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