Wednesday, August 29, 2012

Mundell, the Euro, and Optimum Currency Areas

Ronald McKinnon
May 22, 2000


RM - The International Monetary System: The Missing Factor

"Are present international monetary arrangements optimal? My answer is no. There is a missing ingredient in the international monetary system. The missing ingredient is a world currency, and until such a facility is created, the existing arrangements, while likely to continue, will be, at best, second best. Restoration of the gold standard at the current dollar price of gold, however, would result in deflation if the restoration led to an increase in the demand for gold (as it undoubtedly would). Gold would again become a standard of value if and only if it were made stable in terms of currencies..."

"...Gold would today make an excellent unit of value for the world economy if the conditions for its stability still existed.
However, there is a problem with the distribution of gold. Over one third of the stock is held by central banks and international institutions. Another third is embedded in industry and jewelry, and the remaining third is in speculative hoards. Any concerted movement of gold into or out of central bank stocks- or even the expectation of such a move-would destablize gold in terms of the commodity price level..."
In short, whether gold is stable or not depends inter alia on the gold policies of governments. It is not enough to rely upon the recent quasi-stability of gold in real terms because gold might become destabilized by the very actions involved in returning to a gold standard. If any country returned to the gold standard today, its price stability could be upset by changes in the gold preferences of other countries.

The United States today, for example, holds about a quarter of the central bank stocks of gold, and seven European countries hold over half. If the United States unilaterally restored the gold standard, its price level could be destabilized by gold dumping in Europe; similarly, if powerful countries with low gold stocks began to accumulate them, the United States would suffer deflation.

It is conceivable that European countries, with their huge gold stocks, could re-establish gold as a vehicle for the promotion of their European currency. A gold ecu, or euror could conceivably provide an alternative route to European Monetary Union.12 But it would be a great mistake to embark on such a course unilaterally without agreement from other countries-especially the United States-about their gold policies. In short, a unilateral restoration of the gold standard by the United States or by Europe (or any country) would be an unwise policy that ignored the lessons of history and the implications of international interdependence..."

(21 have discussed the implications of a European Currency in EMUand the International Monetary System: A Transatlantic Perspective. Austrian National Bank Working Paper No. 13, July 1993.)


Tuesday, August 28, 2012

Fritz Machlup

Some publications

- The Book Value of Monetary Gold.    Dec. 1971   

- Plans for Reform of the International Monetary System.    Aug. 1962; Revised ed.,
Mar. 1964   
- Euro-Dollar Creation: A Mystery Story. [Reprinted from Banca Nazionale del Lavoro Quarterly Review, No. 94, September 1970].
- Speculations on Gold Speculations. [Reprinted from American Economic Review, Papers and Proceedings, Vol. 56, May 1969].     May 1969     
- The Price of Gold. [Reprinted from The Banker, Vol. 118, September 1968].     Sep. 1968 
- World Monetary Debate--Bases for Agreement. [Reprinted from The Banker, Vol. 116, September 1966].     Sep. 1966 
- From Dormant Liabilities to Dormant Assets. [Reprinted from The Banker, Vol. 117, September 1967].     Oct. 1967
- Credit Facilities or Reserve Allotments? [Reprinted from Banca Nazionale del Lavoro Quarterly Review, No. 81, June 1967].     Sep. 1967
- International Monetary Systems and the Free Market Economy. [Reprinted from International Payments Problems: A Symposium, Washington, American Enterprise Institute, 1966].     Feb. 1966
- Real Adjustment, Compensatory Corrections, and Foreign Financing of Imbalances in International Payments. [Reprinted from Robert E. Baldwin et al., Trade, Growth, and the Balance of Payments, Chicago, Rand McNally, and Amsterdam, North-Holland, 1965].     Sep. 1965     
- The Cloakroom Rule of International Reserves: Reserve Creation and Resources Transfer. [Reprinted from Quarterly Journal of Economics, Vol. 79, August 1965].     Sep. 1965 

- "Eight Questions on Gold", 1941, AER.
- "The Need for Monetary Reserves", 1966
- "Eurodollar Creation: A mystery story", 1970, BNLQR.

AEI - Monetary Integration 1973


European economic integration and monetary unification

Composition of the group:

Professor Dr. H.W.J Bosman
Professor B. De Jouvenel
Professor J. Denizet
Professor D.G.M Dosser
Professor Dr. H. Giersch
Professor G. Magnifico
Professor J. E. Meade
Professor R. A. Mundell
Professor Dr. W, Neubauer
Professor F. Onida
Professor T. Peeters

Regular commission participants in the group´s work
Mr. U. Mosca
Mr F. Boyer De La Giroday
Mr. P. Van Den Hempt
Mr. J. De Maeyer

Mr. J.C. Morel
Mr J. Schùler

This, however, does not necessarily imply that gold cannot serve any useful purpose in the construction of the European Monetary Union. Because a large body of opinion still regards gold as a factor of monetary discipline, the issue of the European currency might be linked to gold. The link should be fractional and ajdustable in order to avoid building into the mechanism of creation of the European currency a constraint of the gold-standard type. As the C.E.C. circulation explained, the link envisaged here would lead to the de facto centralization of the national gold stocks.


Because gold is underpriced a special official. European shadow price of gold should be set above the official price as a preliminary arrangement until a satisfactory international solution to the undervaluation of gold ie found.



Memorandum from the Commission to the Council on the organization of monetary and financial relations within the Community
(12 January 1972)


AEI - The European Community looks at monetary integration

 Speech by Vice-President Ortoli at the Financial Times Colloquium. Frankfurt, 14 February 1979

"...The developments which have taken place since then and which resulted in the decisions taken at the Hague Summit on Economic and Mometary, the Werner Plan, the Barre Plan, the partial establishment of the "snake" and then the initiatives launched in 1977-78 were prompted by two major considerations.

The first consideration is a political one and reflects the conviction that our countries have a common destiny. The idea ot European Union, with'all its imprecision, is the expression ot this aspiration, and Economic and Monetary Union the key instrument.

The second consideration is much more practical and of much more immediate significance. It stems from two premices: that monetary instability constitutes a major threat to our economies, and that to put an end to such instability, we must begin by establishing in Eurppe, between highly interdependent and institutionally linked economies, a zone of monetary stability..."

The first objective is to maintain real stability in the relationships between the currencies participating in the system

.. {a) In order to do this, any two Community currencies will each have a maximum permissible fluctuation margin of 2.25% against one other, with the exception of the lira, for which the margin will be 6%. Once the limit is reached, intervention will be automatic, but here we see the first difference with the "snake". This lies in the scale and time-span of the resources deployed to help ensure that the maximum divergence limit is not exceeded and also in their form since the EMCF will henceforth issue ECU against the deposit by the central banks of 2o% of their gold and dollar reoervcs.


The emergence in Europe of a zone of monetary stability is in no way an indication tlmt the Community wiches to take a stand against the United States but it docs mean that, in order to defend this stability, Europe must enter into a constructive dialogue with its major partners on the future ot the international monetary system.



Alan J. Dillingham
Assistant Professor
Political Science Department
Villanova University

"The monetary construction of Europe resembles the myth of Sisyphus in its origins, but will finish, I hope, as well as the Aeneid."
- Valéry Giscard d'Estaing
January 25, 1974

"...Since 1969, there has been a definite movement in French monetary diplomacy away from national sovereignty and towards greater integration. While Charles de Gaulle saw no need for coordinated policies, new European institutions or compromising French national sovereignty in any way, his successor, Georges Pompidou, proposed closer European cooperation through a narrowing of intra-EC parity margins and the creation of a Community Reserve Fund. When Valéry Giscard d'Estaing took office in 1974 he proposed creating a common currency for the EC, which was later incarnated within the European Monetary System (EMS) as the European Currency Unit (ECU). Building on Giscard's ideas, Edouard Balladur proposed constructing a European central bank in January 1988. The French draft treaty on economic and monetary union, submitted by Pierre B‚r‚govoy in January 1991, went beyond Giscard and Balladur's ideas, suggesting that national central banks be required to implement the decisions of a politically independent European Central Bank and that the Ecu be transformed into a single currency that would replace all national currencies within the Community. In accepting the final version of the Maastricht Treaty, France went further still in its willingness to surrender sovereignty by agreeing that all national central banks should be made politically independent and by accepting strict convergence criteria for economic policy covering price stability, interest rates, deficits, debt and currency stability..."

"...The failure of the Snake to protect the French economy from the economic and monetary turmoil of the early 1970s led Pompidou's successor, Val‚ry Giscard d'Estaing, to push French monetary diplomacy further in the direction of Europe. French'proposals centered around an idea that had long been one of Giscard's pet projects -- the creation of a common currency for the European Community.[29] The Community currency Giscard had in mind would not replace national currencies. Rather national currencies would remain in use within each national economy, while the Community currency would replace the dollar as a means of settlement between European countries. The Community currency would actually be a basket made up of the national currencies and would be backed by a portion of the official reserves of the member states pooled into a European Monetary Fund. Each national currency would have a central rate against the Community currency that could be changed if necessary.[30]
Giscard's designs were formed to counter external constraints. As his close political ally, Michel Poniatowski noted:
"(Europe) will make itself, slowly, progressively .... (I)t will be a response, a defense, a resistance to external pressures. The institutions will vary according to the intensity of these pressures. The weaker the constraint, the weaker the unification, but the stronger the constraint, the greater unification will be."[31]..."

"...Giscard himself identified monetary integration as the primary objective of France's European diplomacy.[32] The primary purpose of the Community currency would be to raise the specter of an alternative to the dollar as an international currency and thus perhaps nudge the US into taking the policy measures necessary to protect its currency.[33] If this succeeded, a measure of international, and thus European, monetary stability would be restored at little cost to Europe. If this failed, a Community currency could still provide a defense for the franc against dollar instability. By reducing the dollar's role in intra-EC payments it would reduce the vulnerability of EC currencies to fluctuations in the dollar..."

"...Giscard found turning his dream of a European currency into a reality rather difficult. In March 1975, a new unit of account for the Community was defined against a basket of EC currencies, but its use was far more restricted than the French had originally hoped.[36] Giscard's decision to bring the franc back into the Snake in July 1975 was followed by a second humiliating withdrawal in March 1976, severely weakening his diplomatic efforts to create a Community currency.[37] It wasn't until 1978 that an opening for French diplomacy presented itself. A new dollar crisis and international pressures on West Germany to reflate its economy, motivated its chancellor, Helmut Schmidt, to join with Giscard in launching the European Monetary System (EMS), which came into operation in March 1979.[38]..."

"...The new EMS saw the transformation of the European unit of account into the European Currency Unit, or ECU. Each national currency was given a divergence threshold relative to its central rate against the ECU to single out which countries might be the source of instability within the system.[39] Crossing the divergence threshold would entail a "presumption" to act, unless after consultation with the other central banks, it was agreed that action was unnecessary.[40]
However, French unwillingness yet again to compromise on the issues of policy coordination and supranationality prevented the ECU from becoming the centerpiece of the EMS. The German Bundesbank thwarted French proposals for a European Monetary Fund that would manage the ECU's rate against the dollar and insisted that the ECU be treated merely as a swap arrangement by central banks, renewable every three months by unanimous consent of the member states.[41] The system of central rates against the ECU did not replace the parity grid system of the Snake, but rather existed alongside it. Furthermore, in practice, the divergence'indicator failed to operate as a symmetrical system of adjustment between EMS currencies.[42]..."

"...Balladur's central bank initiative represented a step beyond previous French proposals to create a reserve fund and a significant movement towards closer integration. However, in some significant ways Balladur's proposals reflected a continuing French desire to minimize surrendering national sovereignty. If the French desired a European central bank, they had a very particular view about what kind of bank they wanted. A "central bank of central banks" was the desired goal which would complement, but not replace national central banks. The European central bank itself would be outside the institutional framework of the European Community and clearly subordinated to the political control of the national governments. It would manage a portion of the member states' official reserves and act on international markets to protect EC exchange rates against external disturbances. For their part, national banks would act to maintain intra-EC parities according to precise obligations for intervention and adjustment affecting strong as well as weak currency countries. It was also clear from this arrangement that the ECU would be a point of reference, a reserve instrument and a means of intra-European payments, but would not replace national currencies within their own states.[57]
Balladur's central bank initiative started the process that eventually culminated in the signing of the Maastricht Treaty in December 1991. The Hannover EC summit of June 1988 approved the appointment of an expert committee to report on monetary integration. This committee produced the Delors report in April 1989, which delineated a three stage process for creating a European central bank and a single European currency. The Madrid summit of June 1989 endorsed the Delors report and called for an intergovernmental conference to draft a new treaty for European monetary integration. The Strasbourg summit of December 1989 decided to convene this intergovernmental conference in 1990. The Rome summit in October 1990 approved an agenda for economic and monetary union which would include a European central bank and fixed exchange rates. The intergovernmental conference itself, which would produce the Maastricht Treaty, opened in Rome in December 1990...."


AEI - Monetary policy in the countries of the European Economic Community. Institutions and instruments



Report on economic and monetary union in the European Community

Collection of papers submitted to the Committee for the Study of Economic and Monetary Union

This report has been prepared in response to the mandate of the European Council to study and propose concrete stages leading towards economic and monetary union


I - Introductory note

II - The Werner Report

G. D. Baer and T. Padoa-Schioppa: The Werner Report revisited (September 1988)

III - Papers relating to economic union

J. Delors: Economic and monetary union and relaunching the construction of Europe (September 1988) .

M. F. Doyle: Regional policy and European economic integration (December 1988) .

J. Delors: Regional implications of economic and monetary integration (January 1989).

A. Lamfalussy: Macro-coordination of fiscal policies in economic and monetary union in Europe (January 1989)

IV - Papers relating to monetary union

K. O. Pöhl: The further development of the European Monetary System (September 1988)

N. Thygesen: A European central banking system - Some analytical and operational considerations (October1988)

J. de Larosiere: First stages towards the creation of a European Reserve Bank The creation of a European Reserve Fund (October-December 1988)

W. F. Duisenberg: The ECU as a parallel currency (October 1988)

J. Godeaux: The working of the EMS: A personal assessment (November 1988)

A. Lamfalussy: The ECU banking market (December 1988)

G. D. Baer and T. Padoa-Schioppa: The ECU, the common currency and the monetary union (January 1989) .

A. Lamfalussy:
A proposal for stage two under which monetary policy operations would be centralized in jointly-owned subsidiary (January 1989)

P. Jaans: The basic difference between the frameworks for policy decision-making provided by the EMS and EMU (March 1989) .

C. A. Ciampi: An operational framework for an integrated monetary policy in Europe (April 1989) .

List of members of the Committee



Address by Mr Henri Simonet
Vice-President of the Commission of the European Communities

"...But in countries which were already in a weaker position, the oil deficit cannot be met out of monetary reserves.  Indeed, these reserves would be exhausted in a few months. Even if monetary gold were valued at a market related price, these countries could not in the short term foot the bill. And it is a moot point whether the oil-producing countries would in fact put up with such an official increase in the price of gold without demanding a parallel increase in the price of oil. The monetary reserve instrument should therefore be handled with caution, and for the countries hardest hit it is not adequate..."


AEI - Report from the Commission to the Council on the adjustment of short-term monetary support arrangements and the conditions for progressive pooling of reserves

Report from the Commission to the Council on the adjustment of short-term monetary support arrangements and the conditions for progressive pooling of reserves (presented to the Council on 28 June 1973). COM (73) 1099 final, 27 June 1973. Bulletin of the European Communities, Supplement 12/73



Monday, August 27, 2012

TPS - The IMF in Perspective



Pietro Catte

"...On the role of a monetary policy anchor, Padoa-Schioppa suggested that the original Triffin dilemma – the need for the United States to provide dollar reserves to the world would inevitably undermine confidence in the dollar, as its dollar liabilities would eventually exceed its gold holdings – was just a special case of the more general flaw of any international monetary regime based on a national currency. That is, a US monetary policy conducted pursuing solely domestic objectives could not provide an adequate global anchor, and would ultimately prove inconsistent with the stability requirements of the system as a whole.

A conceivable SDR-centred system – the development of private SDR markets turning special drawing rights into a true reserve asset usable for official intervention and serving as a benchmark for countries’ exchange rate policies – might have the advantage of being more symmetrical and therefore subjecting issuers of reserve currencies to greater policy discipline. But it would not truly resolve the inconsistency as long as the SDR remained just a basket and the global monetary stance just the average policy stance of its component currencies. “In the absence of a global policymaker pursuing ‘what is beneficial for the world’, a mere average of policies driven by national objectives cannot produce the global public good of a stable monetary anchor on a global scale.”

What type of arrangement could play the role of “global policy-maker”
? One conceptually viable solution would be a truly global currency – perhaps the SDR itself, if it should morph into a full-fledged currency – managed by a global policy-maker in order to meet the global demand for reserves, with the policy stance determined by the scarcity of its supply. However, such a solution, reminiscent of Keynes’ Bancor, would probably be regarded as far-fetched by many observers. An alternative, at least in theory, would be policy coordination among the main monetary areas, but while some elements of a framework for coordination already exist (the IMF, the BIS, the G7, the G20), Padoa-Schioppa contended that this alternative may be no less far-fetched. “All past and recent experience suggests that, in practice, coordination fails precisely when it is most needed, i.e. when policy preferences are most divergent”.20 In the end, he did not offer a solution: “For the time being, I think we can conclusively prove that we need a flying object; inventing the airplane is a different matter altogether.”..."

Padoa-Schioppa was strongly critical of the thesis that interdependence could be selfregulating, with no need for supranational governance, and identified as one of that view’s ideological underpinnings the doctrine of the “house in order”. According to that doctrine, if every country pursued sound domestic policies, international order and stability would automatically follow. There would be no need for national authorities to decide anything in common; it would be enough for them to exchange information. Cooperative arrangements could even be dangerous, insofar as they might blur policy responsibilities and provide an excuse to deviate from sound national policies. Padoa-Schioppa found this notion dangerously misleading.21 First, while universal adherence to sound policies would obviously help, it cannot be seen as a precondition for cooperation, since a cooperative order is needed precisely to create the proper incentives for good behaviour and to manage the consequences of deviations from it. Second, even if all houses were in order, there would still be “common areas” (trade and financial relations, exchange rates, health, the environment, poverty) where externalities are too important to be ignored and need to be managed in common.


P - The transition to EMU in the Maastrich treaty

Lorenzo Bini-Smaghi
Tommaso Pado-Schioppa
Francesco Papadia

"This essay discusses the background of the EMU negotiations and the main events leading up to the Maastricht Treaty. It reviews the emergence of the key issues, the passage to the second and third phases of EMU, the definition and assessment of convergence, and the monetary institution in the transition. It notes, in particular, that economic analytical concepts are not always easily translated into the complex form of legal contract represented by an international treaty between twelve states. The essay contains the transitional provisions of the Treaty, a chronology of events, as well as pertinent extracts from the Maastricht Treaty."


Friday, August 24, 2012

AEI - Monetary disorder

Opinion, Brussels 1978

The European Communities' Economic and Social Committee,
chaired by Mr Basil de FERRANTI,
approved this opinion at its 160th Plenary Session, which was held on 20 and 21 June 1978.
The preliminary work was done by the Section for Economic and Financial Questions and the Rapporteur was Mr Yvan


"..Main features of world currency relationships
The situation in which the Jamaica Agreement is being applied is very different from that at the end of the Second World War in which the Bretton Woods Agreement came about.
Main features of world currency relationships
The situation in which the Jamaica Agreement is being applied is very different from that at the end of the Second World War in which the Bretton Woods Agreement came about.
- the USA then held 80% of world gold stocks, whereas it now has only about 25%;
- the dollar is no longer convertible into gold at a fixed rate and can no longer play the role of a monetary standard;
- the United States• permanent deficit on its balance of payments gives grounds for a growing lack of confidence in the dollar. Since 1971, the dollar has considerably depreciated in relation to the German mark, the yen and the Swiss franc, which are considered to be strong currencies.
On the other hand, the dollar is still widely used as a reserve currency by the central banks and as a money of account or settlement for the bulk of international commercial transactions. International claims are frequently denominated in dollars. For the United States this has the great advantage of enabling it to pay for its imports - and, in particular, its oil imports - in its own currency without having to worry about keeping its balance of payments in equilibrium..."
- 56 -
The seigniorage attaching to the dollar can be threatened only by exporters to the United States, who could refuse to accept payment for their exports in dollars. But although such action is being contemplated (particularly by OPEC countries) this is not a very realistic possibility at the present time. But an agreement might perhaps be reached with the United States on a solution to this situation. A return to equilibrium in ~he United States trade balance seems, however, rather uncertain in the medium term, when one considers the difficulties President CARTER is having in getting his energy conservation plan accepted..."


TPS - "Tommaso Padoa-Schioppa and the origins of the euro" by Ivo Maes

Ivo Maes
March 2012
National Bank of Belgium

"Tommaso Padoa-Schioppa was one of the great architects of the euro. He is remembered in particular as co-rapporteur for the Delors Committee and as a founding member of the European Central Bank's Executive Board. He studied economics at the Bocconi University in Milan and at the Massachusets Institute of Technology (with Modigliani). He started his professional career at the Research Department in the Bank of Italy. For Tommaso Padoa-Schioppa, becoming Director-General of the European Commission's DG II (from 1979 to 1983), was a defining moment in both his career and life. At the Commission, his main priority was the European Monetary System, which was launched in March 1979. The early years of the EMS were difficult, with tensions on the exchange markets, several currency realignments and the shelving of plans for a second institutional phase. Padoa-Schioppa was very closely involved in several projects to strengthen the EMS and to improve economic policy convergence. Moreover, he tried to strengthen the position of the ECU and to relaunch European financial integration. The most forceful exposé of his ideas was probably the inconsistent quartet, stating that the combination of free trade, free capital movement, independent monetary policies and fixed exchange rates was not sustainable.
The other main objective for Padoa-Schioppa, as Director-General of DG II, was the strengthening of its analytical capacity. Coming from the Bank of Italy, and with strong contacts with the Anglo-Saxon academic world, Padoa-Schioppa sought to develop DG II's model-building capacity and its links with the academic world. As such, he played a crucial role in the professionalisation of economics at the European Commission. As Padoa-Schioppa emphasised, professionalism and "telling the truth" are probably the best ways that international institutions can contribute to strong and sustainable economic policies and performances. The professionalisation of DGII, together with the strengthening of the Monetary Directorate, were furthermore essential elements to prepare DG II for the important role it would play in the EMU process, also intellectually (for instance with the study "One Market, One Money", CEC, 1990). As such this is also a beautiful illustration of Padoa-Schioppa's emphasis on the importance of strong institutions, also in the process of European integration.
At the Commission, Padoa-Schioppa became further immersed in several European networks. Of crucial importance here were his contacts with Jacques Delors. This would be of enormous importance for his further career, becoming one of the architects of the single currency. However, he was also among the first to warn of the dangers of "a currency without a State"."


Thursday, August 23, 2012



Ive Maes
2 November 2004

This paper discusses macroeconomic and monetary policy-making at the European Commission in the 1960s. The Commission, in its analysis, focussed strongly on economic imbalances in the Community, as they could threaten the common market project. In order to strengthen the system of economic governance of the Community, the Commission advocated an improved monetary cooperation, in line with the internal logic of the integration process. This contrasted with the view of the central bankers, who took the international monetary system as the framework for their analysis. The paper shows the ascent of the Commission as an actor in the monetary area, notwithstanding the relatively limited provisions of the EEC Treaty.


COFS - NEWS from Subcommittee Chairman Michael N. Castle

Committee on Banking and Financial Services
Subcommittee on Domestic and International Monetary Policy
FOR IMMEDIATE RELEASE     Contact: Ron Bonjean
April 28, 1998     (202) 225-4165

Chairman Castle
Opening Statement
Hearing on the Euro - The European Common Currency
Monetary Policy Subcommittee
April 28, 1998

"...The dream of a unified Europe that harkens back to the Holy Roman Empire may today be closer to reality than ever before. Incidentally, this first step will promote the integration of a competitive $6.4 trillion economy, second only to our own. This new currency could exert significant influence upon U.S. monetary, trade and economic policies. Thus, it is important for this Subcommittee to help Congress and the American people understand what the impact of the EURO will be for the U.S. and the world..."

"Early on, the Europeans will try to induce OPEC to price oil in euros."

"How the euro will compare to the U.S. dollar as a reserve currency, and what effect a strong euro might have on the U.S. economy, are questions begging answers."


EMI - WFD - Statement to the European Parliament subcommittee on Monetary affairs

Statement to the European Parliament subcommittee on Monetary affairs
Delivered by Dr. Willem F. Duisenberg, President of the European Central Bank, 22 September 1998


Delors report - about


"Jacques Delors had suggested that the Special Committee on Monetary Union should not consist of the Finance Ministers from the Community’s Ecofin Council, some of whom were hostile to the Plan, but of the governors of the central banks, who were more or less independent of governments. After lively discussions, the President of the Bundesbank endorsed the Plan, on condition that the future European Central Bank would be independent.
The Delors Report, approved by the Commission, was submitted on 12 April 1989. It took up the definition of Economic and Monetary Union that had already been set out in the Werner Report in 1970. Three conditions had to be fulfilled: full and irreversible convertibility of currencies, the establishment of the free movement of capital, irrevocably fixed exchange rates between European currencies and, finally, the adoption of a single currency..."

"The Delors Report outlined three stages for the achievement of Economic and Monetary Union. The first stage — which required no revision of the Treaties and might be successfully carried out by the existing institutions — involved the completion of the Single Market, closer coordination of economic policy and cooperation in monetary matters, and participation of all the currencies in the Exchange Rate Mechanism of the EMS. During this stage, a Treaty on Economic and Monetary Union would have to be negotiated and ratified. At this point, the second stage would come into play, with the implementation of a new European  system of central banks, which would coexist with the national monetary authorities, and with a federal monetary institute which would pave the way for joint decision-making. After the final stage, economic authority could be handed over to the Union institutions, and the transition could be made to irrevocably fixed exchange rate parities and, if possible, to a single currency which would replace national currencies. The Report thus clearly set out the measures required for the establishment of Economic and Monetary Union, as well as for the transfer of sovereignty which such measures entailed. Nevertheless, it did not specify a timeframe, nor binding deadlines, which were a matter for the political will of the Member States."



Wednesday, August 22, 2012



Council of the EMI

Antonio Fazio
Banca d’Italia

Pierre Jaans
Institut Monétaire Luxembourgeois

Maurice O'Connell
Central Bank of Ireland

Urban Bäckström
Sveriges Riksbank

António José Fernandes de Sousa
Banco de Portugal

Alfons Verplaetse
Nationale Bank van België/
Banque Nationale de Belgique

Jean-Claude Trichet
Banque de France

Nout Wellink
De Nederlandsche Bank

Lucas D. Papademos
Bank of Greece

Klaus Liebscher
Oesterreichische Nationalbank

Edward A. J. George
Bank of England
Front row, from left to right:

Hans Tietmeyer
Deutsche Bundesbank

Sirkka Hämäläinen
Suomen Pankki

Willem F. Duisenberg
President of the EMI

Luis Ángel Rojo
Banco de España
Vice-President of the EMI

Bodil Nyboe Andersen
Danmarks Nationalbank

In the performance of its duties, the EMI Council is assisted by several committees, sub-committees and working groups. The Committee of Alternates, which is chaired by the Director General of the EMI, is composed of senior representatives of the EU central banks, who are appointed by the respective governors.The main task of this Committee is to contribute to the preparation of the meetings of the EMI Council. The Financial Committee is chaired by the Vice-President and comprises the two most senior members of the EMI Council, who serve for one year on a rotation basis.The Financial Committee’s main responsibility is to examine on the Council’s behalf the President’s proposals on the annual budget and the annual accounts, as well as periodical statements of expenses incurred by the EMI during the financial year, and to report on these to the EMI Council. The sub-committees and working groups are composed of experts from the national central banks.The chairpersons of the sub-committees and working groups are appointed by the EMI Council.


BIS - Y V Reddy: Evolving role of gold Πrecent trends and future direction (Central Bank Articles and Speeches)

Y V Reddy: Evolving role of gold – recent trends and future direction
Address by Dr Y V Reddy, Deputy Governor of the Reserve Bank of India, at a conference organised
by World Gold Council, New Delhi, 21 March 2002.
Dr Reddy is thankful to Mr P R Ravi Mohan, Dr A Prasad and Mr S Durganand Swamy for their assistance.


BIS - Philipp Hildebrand: Reflections on the gold market

Philipp Hildebrand: Reflections on the gold marketSpeech by Mr Philipp Hildebrand, Member of the Governing Board of the Swiss National Bank, at the LBMA Conference, Montreux, 26 June 2006.


BIS - Antonio Fazio: The relationships between currencies and gold

Antonio Fazio: The relationships between currencies and gold
Speech by Mr. Antonio Fazio, Governor of the Bank of Italy, at the World Gold Council International
Conference “The Euro, the Dollar and Gold”, held in Rome on 17 November 2000.


Tuesday, August 7, 2012


Ivo Maes, 2 November 2004

"This paper discusses macroeconomic and monetary policy-making at the European Commission in the 1960s. The Commission, in its analysis, focussed strongly on economic imbalances in the Community, as they could threaten the common market project. In order to strengthen the system of economic governance of the Community, the Commission advocated an improved monetary cooperation, in line with the internal logic of the integration process. This contrasted with the view of the central bankers, who took the international monetary system as the framework for their analysis. The paper shows the ascent of the Commission as an actor in the monetary area, notwithstanding the relatively limited provisions of the EEC Treaty..."


AL - The evolution of Alexandre Lamfalussy´s thought on the international and European monetary system (1961 - 1993)

The evolution of Alexandre Lamfalussy´s thought on the international and European monetary system (1961 - 1993)
November 2011
National Bank of Belgium

"The establishment of the European Monetary Institute (EMI), the predecessor of the European Central Bank, on 1 January 1994, was a milestone in the process of European monetary integration. In this paper, we look at the work on the international and European monetary system of Alexandre Lamfalussy, its first president. Lamfalussy pursued a threefold career: as a private banker, a central banker and an academic. Partly under the influence of Robert Triffin, Lamfalussy soon became interested in international monetary issues. This paper analyses his views on the international monetary system and on European monetary integration, including his contributions to the Delors Report, which provided the framework for European monetary union. The paper draws extensively on archival research in the Lamfalussy papers at the Bank for International Settlements and the minutes of the EEC Committee of Governors' meetings. The paper provides not only an analysis of Lamfalussy's thought on European monetary integration, but also offers crucial insight into the Weltanschauung and way of thinking of European central bankers in this period...."


"During his time at the Banque de Bruxelles, Lamfalussy's research interests shifted to monetary and financial issues, both national and international. He was intellectually close to the Radcliffe Report (see Lamfalussy 1961b). In the 1963-1965 period, he was a member of the Segré Committee, appointed by the European Commission, which investigated the integration of the capital markets in the EEC (CEC, 1966). The Segré Report underlined the linkages between freedom of capital movements and progress in other areas, such as monetary and economic policies. He also participated in meetings of several groups on the reform of the international monetary system, one of he most famous being the Bellagio group together with, among others, Sir Roy Harrod, Harry Johnson, Peter Kenen, Fritz Machlup, Robert Mundell, Jacques Rueff, Robert Triffin, Tibor Scitovsky and Pierre Uri 3. In the early 1970s, Alexandre Lamfalussy was a member of the so-called "Group of Rome" (see Lamfalussy et al., 1974). In the mid-1970s, he was a member of the "Villa Pamphili group", which produced a report on monetary arrangements in the European Common Market (Balassa, 1976)..."


[Mrt: The pause was due to my long holiday in South.]