What's the link between the Comoros Islands and interest rates in Germany and Finland? Never even heard of the Comoros? Join the club, the euro club. For the Comoros, soon to be joined by Cape Verde, San Marino and the Vatican City, will from January 1 1999 have a fixed exchange rate with the euro, an arrangement blessed by the Ecofin (the council of EU economics and finance ministers) and hallowed through a formal decision under Article 109(3) of the EU treaty. There.
This is not a joke, though the smiles of French finance minister Dominique Strauss-Kahn when he announced the French parts of the deal to the media were entirely unforced. France has succeeded in putting in place another building block in the construction of an exchange-rate policy for the euro, an edifice that will overshadow the European Central Bank (ECB) in its Frankfurt eyrie.
There is no obvious reason why the existing exchange-rate link between the French franc and the currencies of many former French colonies should not continue unchanged when the franc is replaced by the euro next January. The implications of the present link are, as France keeps telling its euro partners, budgetary ones for the metropolitan country.