EAC draws lessons from euro zone
The East African Community (EAC) has expressed caution as it seeks to shape a monetary union, and has not overlooked the gloomy public debt crisis that has besieged the euro zone, ministers and a local economic expert told worried MPs on Tuesday.
The debt crisis in the economic and monetary union of the 27 member European Union (EU) was highlighted as ministers Monique Mukaruliza, of EAC Affairs, John Rwangombwa, of Finance, and Dr. Thomas Kigabo, the Rwandan negotiator in the ongoing negotiations on the bloc’s anticipated single currency, briefed both chambers of Parliament on the EAC integration plan.
Negotiators from the bloc are mooting the way forward towards the establishment a monetary union. Plans are expected to be ready by the end of this year.
“We are moving slowly on the process of the monetary union so as to first refine all the requirements, but even the problems of the euro zone are giving us lessons,” Rwangombwa stated.
“There are staffers of ours [EAC] who went to the European Union to look at how things are happening, understand the cause to problems there and what lessons we can draw.”
Rwangombwa’s remarks came shortly after the Organisation for Economic Co-operation and Development (OECD) on Tuesday said that the euro zone’s public debt crisis is not over despite calmer financial markets this year.
The OECD warned that the euro zone’s banks remain weak, debt levels are still rising and fiscal targets are far from assured as the bloc heads into its second slump in three years. According to the OECD, the 17-nation area needed ambitious economic reforms adding that there could be no room for complacency.
According to Rwangombwa, it was noteworthy that the EU trusted individual countries to, at all times, give true reports on their individual fiscal policies, but no special body was set up to monitor activities in individual euro zone countries to provide an independent and reliable situational map.
The minister noted that the Greek financial crisis, in particular, was precipitated by provision of false figures to the EU and presently have a very big budget deficit.
“When we [EAC] embark on it, there will be an authority following up on fiscal policies of individual member countries, depending on the criteria that will be set by then.”
Kigabo stressed that a monetary union was an important matter, hence the need for the community to take time to avoid similar mistakes.
“It requires time because when we look at how the euro zone is facing serious problems, it necessitates that people be careful and first put in place all the basic requirements for the common currency to succeed.”
He put the following preconditions in three categories – economical, political and the institutional requirements.
On the economical front, he said the EAC can ably set up a sound monetary union, if and only if, the structures of the five member states are at least similar even if they did not necessarily move at the same tempo in terms of economic development.
The economic sphere, according to Kigabo would also mean the bloc has a matching level of fiscal discipline.