Friday, November 30, 2012

MTF - Britain & the origin of the EMS, 1978

The Euro has its roots in the EMS - the European Monetary System - which operated for 20 years between March 1979 and January 1999.

Files on the setting up the EMS are now being released in Britain and other European countries. We review them here and place the best documents online.

    the first English translation of the secret 30 Nov 1978 meeting at the Bundesbank where Helmut Schmidt won over his sceptical bankers with the promise that the rules of the new system need not be taken too literally, if and when they conflicted with German interests - discovered by David Marsh in researching his new book The Euro (Yale University Press, 2009)
    papers from the European Union archives in Brussels recounting what heads of government actually said to each other in Council
    British documents showing how Prime Minister Callaghan was excluded from key decisions, and how he reacted when the penny dropped

1973 Mar: pre-history - "the snake"

Late in the evening of Thursday 1 March 1973, the British Prime Minister, Edward Heath, met with West German Chancellor Willy Brandt at Schloss Gymnich, near Bonn. It was a time of acute crisis in international markets. The last components of the post-war system of fixed exchange rates, Bretton Woods, were collapsing – the US authorities unilaterally unpegging the dollar from gold, allowing it to float – and European governments were struggling to formulate their response.

Brandt made an astonishing suggestion. The member states of the European Community should join a “common float” against the dollar, linking their currencies and pooling reserves to defend their parities. Since the Bundesbank held vast reserves, unlimited support from this source would have transformed market perceptions of sterling and other participating currencies. It would also have constituted a large step towards full monetary union. For a strong supporter of European integration like Heath, the prospect was alluring. In fact the proposal was not entirely a surprise - we had heard something similar a few weeks before in Paris from Brandt's Finance Minister, Helmut Schmidt - but voiced by the German Chancellor himself, the idea had historic significance.

Bretton Woods had been in decline for several years, destabilised by the weakness of its anchor currency, the US dollar. Responding in March 1971 the six EEC countries agreed in principle to link their currencies as a first step towards monetary union. They made their first practical move towards that goal in April 1972 by launching a currency alignment, soon nicknamed "the snake", setting a limit of 2.25 per cent on deviations between its members. The snake as a whole was permitted to move within a broader range of 4.5 per cent against the dollar, while the dollar itself held a fixed value against gold, at least until March 1973.

Britain had been a founder member of the snake (though yet to join the EEC at that point), but was forced out in humiliating style only six weeks later, sterling then floating free. Under German insistence the snake did little to support the currencies of weaker members: the UK itself had insufficient reserves to defend the parity and indeed its policies lacked the credibility an effective defence required. With a recent history of devaluation and relative economic decline, the markets were inclined to treat British assets as a bad bet. Brandt’s proposal for a kind of super snake offered sterling a way back, and more.

But if there were gnomes in Zurich (as an earlier British PM discovered), there were trolls in Frankfurt, the home of the Bundesbank. West Germany's central bankers tenaciously defended their mountain of gold. Bloodied, Brandt and Schmidt speedily retreated from the idea that German reserves might underpin the joint float and the British were sent away disappointed. Sterling stayed out of the unreformed snake, although for a period, on Heath's instruction and in deepest secrecy, we shadowed it. Over time the system became too tight a discipline for the French franc and lira also, coming to resemble a Deutschmark (DM) bloc rather than a European currency in embryo..."


GFB - VG - European Monetary Cooperation – Past, Present and Future

Intervention de V. Giscard d’Estaing
« European Monetary Cooperation
– Past, Present and Future »
13th Annual Conference of the German British Forum
Bucerius Law School Hamburg
November 5th 2008
"Dear Helmut,
Dear members of the German British Forum,
Ladies and Gentlemen,..."


ECB - VG&HS - The Future of Europe – views from Founding Fathers

Valéry Giscard d’Estaing and Helmut Schmidt
“The Future of Europe – views from Founding Fathers”

Discussion upon invitation of the European Central Bank
moderated by Jean-Claude Trichet
Frankfurt am Main, 2 April 2009 


Thursday, November 29, 2012

BdF - ChN - Remaining challenges facing the euro area

The Foreign Correspondents Club of Japan
Tokyo, 10 October 2012
Speech by Christian Noyer
Governor of the Banque de France
Remaining challenges facing the euro area


Monday, November 26, 2012


Association for the Monetary Union of Europe

European Council round table talks in Hannover, 27.06.1988, where it is decided to set up a Study Committee on the Economic and Monetary Union, chaired by Jacques Delors, then President of the European Commission. (Photo: European Commission)
The Association for the Monetary Union of Europe is a lobby group campaigning for a single currency in 1987, financed by Europe's major companies.
European Council round-table talks started in Hanover on 27 June 1988. The summit decided to set up a Study Committee on the Economic and Monetary Union, chaired by Jacques Delors, then President of the European Commission.


Thursday, November 22, 2012

TPS - on the appointment of Mr Tommaso Padoa Schioppa as member of the Executive Board of the European Central Bank

11 May 1998

on the appointment of Mr Tommaso Padoa Schioppa as member of the Executive Board of the European Central Bank (7993/98 - C4-0260/98)
Committee on Economic and Monetary Affairs and Industrial Policy
Rapporteur: Mrs Christa Randzio-Plath


TPS - "Notre Europe" chair Tommaso Padoa-Schioppa on the euro

 One of euro founders interviewed
In Parliament to discuss transatlantic relations with MEPs

Tommaso Padoa-Schioppa, chair of "Notre Europe" at the EP on Tuesday 16 March for talks with Foreign Affairs MEPs on their report "Charter for a New Euro-American Partnership" ©BELGA/EPA/M Cavanaugh

One of the men considered to be the founding fathers of the euro currency met MEPs on the Foreign Affairs Committee Tuesday (16 March) to talk about transatlantic relations. Tommaso Padoa Schioppa was formerly on the board of the European Central Bank and now chairs the Paris-based think tank "Notre Europe". As the euro goes though choppy waters we caught up with him to ask a few questions about the common currency.

You are often referred to as one of the "founding fathers of the euro"? Has the European currency fulfilled the expectations you had some 25 years ago?

My expectations on the euro have been met fully, it is an enormous success. It provides a high degree of financial stability and the European Central Bank is capable of managing the euro in times of crisis very effectively.

My expectations have not been met in the construction of other European policies, not sufficient progress has been made. So we are still in a condition where the action of the EU is insufficient. But this does not apply to the euro in any sense.

The euro and the US dollar are competing on world markets to be the leading currency. Who will get the upper hand in the long term?

Well, the outlook of the currency system in the long-term is very uncertain. I think that as the world becomes more global and has a number of very big economic actors it is increasingly difficult for the currency of just one country or one region to be the world currency. This is true for the dollar but it would be even true for the euro.

So what is necessary is to develop a new form of international monetary cooperation which is however entirely to be invented, we are still very far from that.

There are still many sceptical voices saying that the euro will eventually fail. Is this a lack of faith or are there real risks which may endanger the common currency?

I think that nobody really thinks that the euro is in any sense in danger. There are of course, in a very wide debate, always various voices, but I see nobody with authority who predicts anything like that and I do not see any sign of that.

On the contrary I see that precisely in this moment there is a growing awareness of the fact that the euro is a common element of strength to which everybody is committed to. 


Tuesday, November 20, 2012

EP records - Euro



Briefing 29
Briefing prepared by the Directorate-General for Research
Economic Affairs Division
The opinions expressed in this brief are those of the author alone,
and do not necessarily represent the view of the European Parliament

Task Force on Economic and Monetary Union

Non-participating EU currencies should be linked to the Euro through a new Exchange Rate Mechanism. The rate of the Euro against the $, etc. will be determined by action under Article 109 of the Treaty; by the European System of Central Banks’ foreign exchange operations; and by international monetary cooperation.

Luxembourg, 4th April 1997 PE 166.752


Monday, November 19, 2012

JdL - The Achievement and Challanges of European Union Financial Integration and Its Implications for the United States

Jacques de Lacroiére, 2007


Tommaso Padoa-Schioppa: a preliminary bibliography of his writings

Tommaso Padoa-Schioppa: a preliminary bibliography of his writings
Prepared for the Conference
in memory of Tommaso Padoa-Schioppa
Rome, 16 December 2011
edited by Rosanna Visca, Valentina Memoli and Silvia Mussolin
Rome, Bank of Italy


G30 - Larosière - The Long-term Outlook for the European Project and the Single Currency

Occasional Paper 84
Group of Thirty, Washington, DC
Jacques de Larosière

"...Regardless of monetary arrangements, Europe will remain a major player in terms of the size of its market, its share in international trade, and its industrial base, especially due to the resilience and world importance of the euro, which have been tested during the crisis..."


TPS - BIS - Mr. Padoa-Schioppa reviews his experience in central banking over the last thirty years

Mr. Padoa-Schioppa reviews his experience in central banking over the last thirty years 
(Central Bank Articles and Speeches, 7 Apr 97)

Mr. Padoa-Schioppa reviews his experience in central banking over the last thirty years Text of the remarks by Dott. Tommaso Padoa-Schioppa, a Deputy Director General of the Bank of Italy, at the Governors' Dinner held in Basle on 7/4/97.

"...12. Although I started to attend BIS meetings well before this tower was constructed (in the old hotel building of the Centralbahnstrasse), it was only when you called me to the Basle Committee that I fully realized how strong this soft approach could be. Lawyers say that the Basle Committee “does not legally exist”. When I was appointed to its chair, my secretary had to take my word for it because she could not find any written evidence of the decision. Yet the Committee rules, once endorsed by you, are adopted by the markets, followed by national legislators and spread to all countries worldwide.
When considering the working methods of the Basle Committee, I have often thought that international cooperation among central banks can be compared to Italo Calvino’s “Nonexistent Knight”. When Charlemagne, reviewing his paladins before the battle against the Infidels, reached the last knight, Agilulf, clad entirely in white armour, the cavalier refused to show his face to the emperor. The explanation he gave was simple: “Sire, because I do not exist”. Charlemagne insisted and when the knight finally raised his visor, the helmet was empty. “Well, well! Who’d have thought it!” exclaimed Charlemagne. “And how do you do your job, then, if you don’t exist?”. “By will power and faith in our holy cause!” said Agilulf. He fought with valour and bravery. His special status assisted him in the accomplishment of his duty and indeed he proved to be one of the best paladins."


STFED - Exhibit 62

Exhibit 62 - Communique of the Interim Commitee of the Board of Governors of the IMF on the IMFS,
October 1, 1979,
issued after the 13th meeting in Belegrade, Yugoslavia


Monday, November 12, 2012