October 9, 2002	Wednesday	Sha’aban 2, 1423

LUXEMBOURG, Oct 8: European Union finance ministers agreed in principle on Tuesday to a small capital increase at the European Central Bank when the bloc enlarges to take in new members, mainly from eastern Europe, diplomats said.

One diplomat said the decision would also mean a small increase in ECB foreign exchange reserves, which are transferred by national central banks to the ECB in relation to their share in its capital, but an ECB spokesman could not confirm this.

The issue will be studied further by senior finance ministry and central bank officials before a formal proposal is made, the diplomats said.

“The only question now is the procedure. Whether we do this via the (EU candidates’) accession treaties or use the enabling clause in the treaty,” another diplomat said.

The ECB currently has a capital base of five billion euros ($4.9 billion) and 50 billion euros of reserves, mostly in foreign exchange and 15 percent in gold.

Diplomats said a 10 per cent increase in the capital, to be subscribed by the new EU member states, was under consideration. This was favoured over the alternative, reducing existing EU members’ shares to create room for the newcomers.

The amount each EU country has to contribute to the ECB capital is laid down in a formula in the EU’s Maastricht treaty.

Eurozone members have to pay up their full shares. Non euro zone countries must only pay in a small part of their shares, to generate interest income to cover the cost of their participation in the European System of Central Banks, that includes all EU central banks.

With EU enlargement, these costs of running the ECB will increase. Without an increase in paid in capital, the resources available to the ECB would, however, have remained the same, one diplomat said.—Reuters