European monetary system and european currency

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In order to explain to the public the Eurosystem's policy actions against the background of the adopted monetary policy strategy, the Eurosystem uses several channels: the ECB's Monthly Bulletin; the issuance of a detailed press release after each Governing Council meeting, in which the decisions are explained; the organisation of a monthly press conference at the ECB; the appearances of the President at the European Parliament; and, finally, the numerous speeches and articles by the members of the Governing Council. Taken as a whole, the Eurosystem is probably among the more active central banks when it comes to explaining its policies to the public.

A further important building block in order to establish credibility is the promotion of an efficient implementation of the monetary policy decisions. The Eurosystem has aimed to set up an operational framework which is consistent with market principles and which ensures equal treatment of counterparties and financial systems across the euro area. The Eurosystem's operational framework is based on the principle of decentralisation in order to take advantage of the established links between the national central banks and their counterparties. The monetary policy operations will therefore be conducted by the national central banks, while decisions are taken centrally in the ECB's decision-making bodies.

The consequences of a single currency: perspectives for the future

The most important effects of the single currency relate to the possibility of improving macroeconomic stability and credibility for the policies pursued; these effects are particularly important for the smaller European economies. Moreover, important benefits can be derived from microeconomic factors, such as lower transaction costs, wider and deeper financial markets, improved price transparency and increased competition.

Starting with the macroeconomic factors, Monetary Union makes it possible for the participating countries to combine their credibility. In this way, small countries can, to a certain extent, "borrow" credibility from some of the large countries which have pursued stability-oriented policies for a long time. Under credible conditions, the financial markets are no longer under pressure from speculative attacks by large institutional investors. Price and interest rate developments are stabilised, and the investment climate for companies is secured. In the microeconomic field, the most obvious consequences relate to lower transaction costs and increased price transparency across national borders. These factors are likely to contribute to increased competition and downward price pressure on many products.

One very important consequence is that the use of a single currency will give rise to larger and more competitive financial markets in the euro area. In most European countries, the financial markets have, by tradition, been rather shallow, with few participants and a rather narrow set of financial instruments on offer. A high degree of segmentation and a lack of cross-border competition have implied relatively low trading volumes, high transaction costs and a reluctance to implement innovative financial instruments.

On the introduction of the euro, the foreign exchange risk of trading in the different national markets in the euro area fully disappeared. This has triggered increasing cross-border competition and has provided an incentive for the harmonisation of market practices. In fact, the trading of money market paper and euro area government bonds can already be considered to be largely integrated. The markets for private bonds are still segmented owing to the differing institutional and regulatory conditions across Member States, but they, too, will gradually integrate and provide an incentive for increasing the issuance volumes of private bonds. This will contribute to reducing the financing costs for private companies, and it will provide improved opportunities for investors.

Monetary Union provides much needed assurance of exchange rate stability for exporters, importers and investors. This is particularly important for small and open economies. In fact, most countries in Europe are to be considered small in the current global perspective. The active use of the exchange rate as a tool of economic policy could be an alternative for a large reserve-currency country. For a small country, experience has shown that large changes in the exchange rate tend to give rise to higher costs rather than benefits, due to the harmful effects on expectations and higher interest rates.

Some of the economic effects of the Monetary Union may partially benefit also the countries remaining outside Monetary Union. Nevertheless, it is important for the "out" countries, to assess whether they find that the benefits of maintaining a national monetary policy "autonomy" - if there is any such autonomy in an integrated and globalised market situation - outweigh the possible drawbacks of not being able to fully draw on the credibility of the euro area, the integration of the euro area financial markets, lower transaction costs, improved price transparency and increased competition.

Реферат опубликован: 12/08/2008