BRUSSELS, Belgium, Oct. 29, 1993 (UPI) -- The European Community decided Friday to put its future central bank in Frankfurt, Germany.
EC leaders, who were gathered for a special summit to celebrate the ratification of the Maastricht Treaty on European union, opted to give the European Monetary Institute to Germany, whose Deutsche mark forms the foundation of the EC's basket of currencies.
The move followed an hours-long horse-trading session, in which countries competed to gain the sites for several desirable agencies.
The heads of state and government also named 64-year-old Alexandre Lamfalussy of Belgium to head of the prototype EC central bank.
The EMI, the forerunner of an EC central bank, will start working Jan. 1, 1994. With Lamfalussy at the helm, it will have the job of coordinating monetary policy by the 12 EC central banks and preparing the way for a single European currency during the second phase of monetary union.
Member states must consult the EMI on any regulation or piece of legislative that affects money policy.
However, the Bundesbank and other individual central banks will maintain control and responsibility for the individual currencies until the third phase of money union, planned for 1997 at earliest and 1999 at latest, when those countries will adopt a single currency.
British Prime Minister John Major, whose country has long pushed to have the EMI in London, said decision was no great loss because the institute was unlikely to ever become a central bank. ''I believe those ambitions are unrealistic,'' he said.
Analysts also said the recent turmoil on foreign exchange markets and the deepening recession in Europe make those dates unrealistic. Heavy trading pressure forced Britain and Italy to abandon the EC exchange- rate mechanism last year, and renewed speculation in August drove the remaining countries to loosen the bands that bind their currencies, effectively nullifying the system.
The decision on the site puts to end a years of haggling.
The ministers also stressed in a statement that the strict economic criteria to be fulfilled before monetary union can go forward are ''crucial.''
The ministers gave their nod to Lamfalussy, who was nominated last week by a committee of EC central bank governors as EMI president after little discussion, an EC official said.
The nomination of the Hungarian-born Belgian must be confirmed by the European Parliament, but that is seen as a mere formality. Lamfalussy will oversee the EMI for three years starting Jan. 1, 1994, when the second stage of the EC plan to create a single currency goes into effect.
Lamfalussy is well-suited to the transitional role, analysts said. Since 1976, he has headed the Basel-based Bank for International Settlements, which coordinates the workings of 33 central banks, and his top priority has been currency stability.
He also helped hammer out the three-phase EC plan for monetary union, which lays out strict criteria for inflation and budget deficits on the way to a single currency.
In the early 1970s, Lamfalussy, who studied economics in Louvain, Belgium, and at Oxford University, was chairman of the board at Banque Brussels Lambert in Belgium.
The summit leaders also gave the nod to seven laws setting up the second step toward a single European currency, but the legislation must wait until the Maastricht Treaty comes into power for final approval.
The legislation spells out how the EMI should coordinate legislation and regulations by the 12 member states in the run-up to monetary union.
The legislation specifies that each EC central bank will have a share in the EMI based half on the size of that country's population and half on its gross domestic product, a broad measure of the goods and services produced.
