European monetary system and european currency

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Before concluding, I should like to add a brief comment on the likely future enlargement of the European Union (EU) and, prospectively, the euro area. Currently, the EU negotiates the accession of six countries to the EU. Once the accession of new Member States is decided, these countries have to fulfil the so-called convergence criteria, if they want to join the euro area. The euro area can finally only be enlarged if the European Council, following an assessment by the ECB and the European Commission, decides that further Member States of the EU are ready to adopt the single currency. New countries joining the euro area will be a challenge for us. For example, we will have to integrate the respective economy fully in our area-wide analysis of monetary, financial and other economic developments in the euro area. Enlargement is a challenge we clearly welcome. I have no doubts that we can master it, not least as the EC Treaty outlines a clear and transparent procedure for countries wishing to join the euro area. In simple terms, this can be viewed as involving three phases. First, a candidate country must join the European Union, for which certain requirements must be met. Second, the candidate is expected to join the new exchange rate mechanism, ERM II. Third, as mentioned earlier, the country must fulfil the convergence criteria. In addition to fiscal discipline and inflation control, these criteria include a relatively low level of long-term interest rates and stable exchange rates.

Let me conclude. Monetary policy cannot solve all of the economic challenges facing the euro area, in particular those concerning the urgent need to reduce the high level of structural unemployment. National governments are responsible for carrying out the required structural reforms. The Eurosystem makes its best contribution to area-wide growth and employment prospects by credibly focusing on the maintenance of price stability in the euro area.

I am confident that the monetary policy strategy adopted by the Governing Council of the ECB last October has been successful - and the monetary policy decisions that have been based on it over the last eight months - serve the fulfilment of this objective. Nevertheless, we will not become complacent; on the contrary, we will have to continue to invest substantially in analysing the structure of the euro area economy, and in understanding the monetary policy transmission mechanism and the information content of the various monetary and economic indicators.

Monetary policy is most effective when it is credible. Transparent and accountable policy-making can help to build up a reputation and credibility. Effective direct communications with the public, including the financial markets, other policy makers and the media requires that we speak with one voice in an even-handed way with our diverse counterparties and audience. Successfully refining our area-wide communications, aimed at making our strategy, and the monetary policy based on it, transparent so that it can be well understood by the large and varied population we serve, is one of the challenges faced by the Eurosystem and, by implication, one of our priorities.



Lecture by Tommaso Padoa-Schioppa

Member of the Executive Board of the European Central Bank

at the London School of Economics, Financial Markets Group

on 24 February 1999


I. Introduction

II. Institutional framework

III. Industry scenario

IV. Current supervision

V. Crisis management

VI. Conclusion



1. I am speaking here, at the London School of Economics, only a few weeks after one of the most remarkable events in the history of monetary systems: the establishment of a single currency and a single central banking competence for a group of countries which retain their sovereignty in many of the key fields where the State exerts its power. To mint or print the currency, to manage it and to provide the ultimate foundation of the public's confidence in it has been, from the earliest times, a key prerogative of the sovereign. "Sovereign" is indeed the name that was given in the past to one currency. And a British Prime Minister not so long ago explained her opposition to the idea of the single currency with the desire to preserve the image of the Queen on the banknotes.

2. For centuries money has had two anchors: a commodity, usually gold; and the sovereign, i.e. the political power. Less than 30 years after the last bond to gold was severed (August 1971), the second anchor has also now been abandoned. Although I personally think that political union in Europe is desirable, I am aware that the present situation, in which the area of the single currency is not a politically united one, is likely to persist for a number of years. This means that we have given rise to an entirely new type of monetary order. For the people, the success of this move will ultimately depend on the ability of governments and political forces to build a political union. For the central banker and for the users of the new currency, the success will be measured by the quality of the currency itself, and such quality will be measured in the first place in terms of price stability. This is not only a requirement explicitly set by the Treaty of Maastricht, it is also, in the opinion of most, the "new anchor" that purely fiduciary currencies need after the gold anchor is abandoned.

Реферат опубликован: 12/08/2008