/www.bloomberg.com/ By Emma Vandore and James G. Neuger
Brussels, (Bloomberg) -- Finland and the Netherlands are holding up proposals to hand more votes on European Central Bank interest rates to large countries such as Germany, saying the plan is unfair to Europe's smaller countries.
Parliaments in the two countries, which together are a quarter the size of the German economy, are blocking the needed unanimous agreement on the shift in ECB decision-making power, European Union officials said at a meeting of finance ministers.
``There is some criticism in Finland,'' said Finance Minister Sauli Niinistoe of Finland, the fifth smallest of the 12 countries using the euro. ``Today we are not going to make a decision.''
Under the ECB's proposed voting formula, the five biggest economies will share four votes while the remaining countries will share 11 votes once the euro expands to embrace Eastern Europe later this decade. The six members of the executive board will each retain a permanent vote.
Critics say this will complicate decision-making at the ECB, which stood accused last year of waiting too long to cut interest rates to buoy the economy. ECB President Wim Duisenberg said yesterday he is ``not proud'' of the proposals.
They would not win ``a beauty contest,'' he told the European Parliament's monetary committee. Duisenberg said leaving decision making in the hands of the executive board probably wouldn't have won approval of the 18-member governing council.
Ten to Join EU
Ten countries will join the EU in 2004 -- Poland, the Czech Republic, Hungary, Estonia, Latvia, Malta, Lithuania, the Slovak Republic, Cyprus and Slovenia. The first new members may adopt the euro as early as 2006.
``Two countries have reservations because it is difficult for them to get the opinion of their parliaments,'' the meeting's chairman, Greek Economy Minister Nikos Christodoulakis, told a news conference. He said he aims to reach an agreement by next month.
Without reform, as many as 33 people could be discussing rates. The U.K., Sweden, Denmark and up to a dozen other countries may swap their national currencies for the euro in coming years.
The ECB's proposal is similar -- though more complicated --to the system used by U.S. Federal Reserve. The Fed's policy-setting Open Market Committee is composed of seven members of the central bank's Board of Governors and the presidents of the 12 regional Fed banks. Of those 19 people, 12 vote at any one time.
The ECB said European countries will be split into three groups when at least 22 nations adopt the euro. Apart from the first group with the biggest countries, a second of group would include half of all euro countries, sharing eight votes. The remaining members would be in a third group, with three votes.
``It's a fair treatment of everybody and it will probably function well in the future,'' said ECB council member Klaus Liebscher. Governments ``will in the end come to the conclusion that it's a good solution.''