Luxembourg

Research guide to European Monetary Union

A special report prepared by Dresdner Bank Luxembourg SA

The heads of state and government confirmed this at the EU-Summit held in Dublin in December. Here, they adopted the legal framework for the euro, accepting the proposal put forward by the European Monetary Institute for the organization of currency relationships between the euro countries and those who will not be participating at the outset. Furthermore, they reached an agreement on the plans for a "stability and growth pact", which demonstrates their desire for sustained budgetary discipline in Emu.

Although at present only Luxembourg meets all the requirements for entry into Emu, we still believe the most likely scenario is that Emu starts on time in 1999 with Luxembourg, Belgium, the Netherlands, Germany, France, Austria, Finland and Ireland. There are numerous indications that economic data in these countries will become even closer during the course of this year. Assuming the trend towards lower inflation continues this year, Portugal might also satisfy the convergence criteria, as the only southern European country to do so.

However, since the choice of countries will be a political decision, we cannot exclude the possibility that Emu will start with a larger group of countries.