European monetary system and european currency

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However, when in 1981 it was decided to save the last specimen of the smallpox virus in a laboratory for the sake of documentation, health had not ceased to be in danger. Similarly, none of these achievements can be considered as permanent and central bankers should primarily strive to preserve them. To this end, detecting new challenges at an early stage is essential. The question is: where do the problems come from? What are the circumstances under which the "old mission" will have to be accomplished in the coming years? What threatens our health besides smallpox?


The first challenge consists in making the Eurosystem a central bank. It may seem simple, but is not. Let me start my explanation from the two key words of this proposition.

Eurosystem is the word chosen by the ECB to indicate the "ECB+11 participating national central banks", i.e. the central bank of the euro. The Treaty has no name for this key entity, while it refers extensively to the ESCB (European System of Central Banks) formed by the ECB and the 15 European national central banks). However, as long as there are "out" countries, the ESCB in its full composition will remain a scarcely relevant entity because it neither refers to a single currency area nor has any policy competence. Instead, the word Eurosystem indicates clearly the articulated entity which is for the euro what the Federal Reserve System is for the dollar.

Central bank is the institution in charge of the public interests associated with the currency. It originates from fundamental changes in the technology of payments: the adoption of banknotes, cheques and giros, and their final disconnection from gold. These changes have shaped the two other functions that most central banks have derived from the original payment system function: monetary policy and banking supervision. Man-made money made monetary policy possible. Commercial bank money made banking supervision necessary.

These three functions have most often been entrusted to the same institution because they are inextricably linked. Just as money has the interrelated roles of means of payment, unit of account and store of value, so central banking has a triadic function that refers to the three roles of money. Operating and supervising the payment system refers to money as a means of payment; ensuring price stability refers to money as a unit of account and a store of value; pursuing the stability of banks refers to money as a means of payment and a store of value. The function remains triadic (albeit, in my view, in a less satisfactory way) even where prudential control is entrusted to a separate agency. I am referring to the special "supervision" any central bank has over its banking community, necessitated by the fact that banks are the primary creators of money, providers of payment services, managers of the stock of savings and counterparties of central bank operations.

In performing its triadic function the central bank exerts operational and regulatory powers, interacts with other public authorities and the financial community, entertains relations with other central banks, participates in international debates and negotiations about monetary and financial matters. In all these activities it pursues and represents the public interest of a sound currency; all are instrumental to that interest. From the point of view of the perceptions of people and markets all such activities refer to that same public good that we call confidence.

For the Eurosystem the challenge is to rise to a full central banking role as just defined. It is necessary because of the links that bind the various functions of money. The Eurosystem would find it hard to play effectively its most delicate role - the pursuit of a stable currency or, as the German Constitution puts it, "die Wдhrung zu sichern" - if it appeared as an inexplicable exception to the classic paradigm of a central bank. The public, the markets, the international institutions and fora would not understand.

But it is also difficult, because the steps to take are multiple and complex from both a conceptual and a practical point of view. Moreover, they cannot all be taken at once. Let me briefly explain.

In the articulation of any federal constitution (Bund, Land and local, to use the German terminology) the central bank undoubtedly belongs to the level of the "federation", or Bund. The fact that important activities are conducted by "local" components of the system (Landeszentralbanken, or Federal Reserve District Banks) is an organisational feature that does not impinge upon the constitutional position of the central bank. The same happens within Monetary Union. The Eurosystem is the central bank of the euro area, even though operations are carried out - to the extent possible and appropriate - through its component parts, the NCBs. Indeed, the constitutional and the organisational profile of the institution are not in contradiction.

Реферат опубликован: 12/08/2008