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© 2003 International Monetary Fund

September 2003

IMF Country Report No. 03/297

Euro Area Policies: Staff Report; Staff Supplement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director on Euro Area Policies

The following documents have been released and are included in this package:

  • the staff report on euro area policies (including the trade policies of the European Union), prepared by a staff team of the IMF, following discussions that ended on June 28, 2003, with officials at EU institutions in the context of the Article IV consultations with countries forming the euro area. Based on information available at the time of these discussions, the staff report was completed on August 7, 2003. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • a staff supplement of September 8, 2003 updating information on recent developments.

  • a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its September 10, 2003 discussion of the staff report on euro area policies.

  • a statement by the Executive Director for the country currently holding the Presidency of the European Council, on behalf of the euro-area countries.

The document listed below has been or will be separately released.

  • Selected Issues

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to

Copies of this report are available to the public from

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Euro Area Policies 1

Prepared by the European I Department

Approved by Michael Deppler and G. Russell Kincaid

August 7, 2003

  • A staff team held discussions at the European Central Bank (ECB) and the European Commission (EC) during May 16-28, 2003 in the context of the 2003 Article IV consultations with euro-area member countries.

  • Meetings were held at the ECB with President Duisenberg, Vice President Papademos, Ms. Hämäläinen, Mr. Issing, and Mr. Padoa-Schioppa (members of the Executive Board), as well as with senior staff. At the EC the mission met with Commissioner Solbes Mira, Mr. Regling (Director General for Economic and Financial Affairs), and other officials. The team comprised Messrs. Deppler (Head), Chadha, Jaeger, Kieler, Huang (all EU1), Dhonte (EUO), and Faruqee (RES). Mr. Lankes (PDR) joined the mission at the EC to cover EU trade issues. Mr. Deppler presented the mission’s preliminary conclusions to the Economic and Financial Committee (EFC) in Granada on May 23 and to the Eurogroup in Luxembourg on June 2.


  • I. Introduction

  • II. Background

    • A. Recent Developments and Cyclical Factors

    • B. Medium- and Longer-Term Factors

    • C. The Outlook and Risks

  • III. Policy Discussions

    • A. Monetary Policy and Inflation

    • B. Fiscal Policies: Long-Run Credibility and Short-Run Flexibility

    • C. Strengthening Medium-Term Prospects: Structural Policies and Pension Reform

    • D. Trade Policy

  • IV. Staff Appraisal

  • Boxes

  • 1. Perspectives on the Euro’s Appreciation

  • 2. Shadows on Longer-Term Performance

  • 3. Past Fund Policy Recommendations and Implementation

  • Figures

  • 1. Post Equity Bubble Adjustment and Financial Conditions

  • 2. Divergences in the Euro Area: Germany Versus Rest, 1991-2003

  • 3. Inflation Is Coming Down

  • 4. The Monetary Policy Stance Has Eased

  • 5. Fiscal Policies Have Not Played by the Rules

  • Tables

  • 1. Main Economic Indicators

  • 2. General Government Fiscal Balances and Debt

  • 3. Balance of Payments

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Euro Area Policies

Supplementary Information

Prepared by the European I Department

Approved by Michael Deppler and Leslie Lipschitz

September 8, 2003

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Public Information Notice (PIN) No.03/118


September 16, 2003

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September 10, 2003