BRUSSELS, Dec. 18 (UPI) -- With less than two weeks until the introduction of the euro, Willem Duisenberg, president of the European Central Bank, said the cash changeover should not have a significant effect on prices in Europe.
"This is largely due to the strong competition in the retail sector and the vigilance of consumers," Duisenberg said in testimony Tuesday before the European Parliament's Economic and Monetary Affairs Committee.
He also said that overall preparations were in their final stages, with a total of 15 billion euro banknotes having been produced by the end of November, far more than the 10 billion euro bank notes, which are expected to be put into circulation during the changeover.
The European Central Bank said it expects the changeover to euro cash to go smoothly beginning Jan. 1.
Besides overseeing the launch of the euro, Duisenberg said the central bank would consider easing strict limits on government borrowing once the current economic downturn had subsided.
He also told the committee he saw no possibility of any change in euro-zone interest rates "for the foreseeable future."
Indicating a new flexible approach to the stability pact limiting government borrowing to 3 percent, he said the slowdown in growth had to be considered.
Saying that current interest rates would apply "for the foreseeable future," he said to cut rates now would be a mistake because any change would only affect the economy in a year to 18 months by which time he expected economic conditions throughout the EU to have recovered.
However, he sent a clear signal that he is willing to accept German demands for an easing of the stability pact rules and to let governments spend their way out of slowdown.
While he insisted he was not for any fundamental change in the stability pact, Duisenberg said budget deficits of countries like Germany should be assessed "bearing in mind the impact of slower growth."
This suggests that the central bank would take into account high unemployment and lower tax revenues arising from weaker economies.
He also acknowledged that Germany and three other countries are "getting dangerously close to the 3 percent limit."
"There should be no change to the rules while the game is in play," he said.
