European monetary system and european currency

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The institutional setting of the euro area establishes a double separation between central banking and other public functions. Firstly, a functional separation, whereby banking supervision is now assigned to institutions that - even when they are national central banks - no longer exert independent monetary policy functions. Of this separation we have many previous examples (Germany, Japan, Sweden, now the UK, etc.). Much newer is a second, geographical, separation, whereby - with only the partial exception of competition policy - the area of jurisdiction of central banking does not coincide with the area of jurisdiction of the other public functions involved (banking supervision, regulation of the securities market, etc.).

Experts, including academic people, have so far focused attention on lender-of-last-resort functions and suggested that the new setting would not be able to act effectively in a crisis. I have argued elsewhere why this criticism seems unjustified. Here, I would like to suggest that the real challenge could come, in my opinion, from tensions between the national and the euro area interest in the process of financial transformation.

The process of industry transformation will inevitably involve aspects that have traditionally been considered as sensitive by public authorities: suppression of jobs, location of facilities and headquarters. Financial transformation will also produce a hardening of competition and competition will be, to a considerable extent, one between national financial centers and industries, not only between individual banks or institutions. The propensity to defend national champions may prevail over the pursuit of efficiency. The risk for the Eurosystem to fall in the trap of an improper interplay between the EU and the national dimension of the public interest may become high. Like any central bank, the Eurosystem should be both active and neutral in the great transformation of "its" financial industry. The word "system" that is part of its own name refers, and should apply in practice, to the whole euro area.


The fourth challenge consists in coping with the lack of a political union. The relationship between monetary and political union and whether the latter should be a precondition for the former has been a central issue in the European debate well before the establishment of the Delors Committee in 1988. While I do think that there is a lack of political union and that this lack constitutes a serious challenge for the Eurosystem, I also think that the expression "lack of political union" is often used in an unclear way that blurs the issue. Let me thus first consider two meanings of this expression with which I do not concur.

First, I do not concur with the idea that there is no political union in Europe today. It is not because the content and the competence of the European Union are mainly economic, that its nature and historical role are not political. Even before the single currency, EU competence extended over virtually the whole Corpus Iuris of economic activity, from the establishment of "the free movement of goods, persons, services and capital" (the four freedoms proclaimed by Article 3 of the Treaty) to external economic relationships. To understand how very political these issues are, it should suffice to think about the place they take in the US political debate today, or have taken in the politics of our countries before the creation of the European Community. Moreover, the institutional architecture of the European Union is entirely that of a political system, not that of an international organisation based on intergovernmental co-operation: a legislative capacity that prevails over that of Member States, a judicial power, a directly elected Parliament.

Second, I do not concur with the idea that Monetary Union has developed outside the political process. Quite the contrary is true. The establishment of a single currency in the European Union has been achieved because of the strong political determination of elected governments over a full decade, from June 1988 to May 1998. It is significant that during that long period continuity has not been broken by repeated changes of political majority in virtually all countries except Germany. Technocrats, i.e. central bankers, have "only" played their role, crucial as it may be. They have provided expertise, from the drafting of the blueprint to the preparatory work for the actual start of the system. And, no less important, they have loyally accepted the limits of their role and recognised that the

Реферат опубликован: 12/08/2008