A SINGLE CURRENCY FOR EUROPE OR EMU BACKGROUND AND CHALLENGES

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A SINGLE CURRENCY FOR EUROPEOREMUBACKGROUND
AND CHALLENGES

• Dr. h.c. Michael Cwik
• DG ECFIN, European Commission

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WHY A SINGLE CURRENCY?

• OUTLINE

A SINGLE CURRENCY - WHAT DOES IT MEAN?
WHY DO WE NEED ONE IN EUROPE?
WHAT ARE THE CHALLENGES?
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A SINGLE CURRENCY - WHAT DOES IT MEAN?

• FOUR ESSENTIALS
• AN INTERNAL MARKET
• gt THE FOUR FREEDOMS
• FAIR AND LOYAL COMPETITION
• gt PUBLIC AIDES?
• SOUND PUBLIC FINANCES
• gt BUDGETARY DISCIPLINE
• COORDINATION OF POLICIES
• gt FRAMEWORK DECISIONS

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A SINGLE CURRENCY - WHAT DOES IT MEAN?

• FOR POLICIES AND INSTRUMENTS
• AS TO ECONOMIC POLICIES
• COMPATIBILITY/CONSISTENCY OF POLICIES
• AS TO FISCAL AND BUDGETARY POLICIE
• CONSISTENT RULES AND POSSIBILITY FOR SANCTIONS
• AS TO SOCIAL POLICIES
• COMPARABLE PUBLIC INCOME SOURCES
• AS TO REGIONAL POLICIES
• POSSIBILITIES FOR TERRITORIAL FINE-TUNING
• INSTITUTIONALLY
• THE LARGER TERRITORY, THE MORE FEDERAL STRUCTURES
• POLITICALLY
• A POLITICAL FRAMEWORK DEMOCRATICALLY CONTROLLED

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A SINGLE CURRENCY - WHY DO WE NEED IT?

• THE POLITICAL ARGUMENTS
• THE ECONOMIC ARGUMENTS

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THE POLITICAL ARGUMENTS

• 1. EUROPEAN INTEGRATION - ITS MOTIVATION
• THE POLITICAL ARGUMENT gt NEVER WAR AGAIN!
• THE ECONOMIC ARGUMENT gt HOW TO SAFEGUARD
  THE LIVING STANDARD?
• THE CULTURAL ARGUMENT gt DEFENDING COMMON
  VALUES!
• 2. MONETARY SOVEREIGNTY - AN ARGUMENT
• BUNDESBANK POLICIES
• THE LOST SOUVEREIGNTY ARGUMENT

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THE ECONOMIC ARGUMENTS

• 1. THE ECONOMIC INTERDEPENDENCY ARGUMENT
• OPENESS OF NATIONAL ECONOMIES
• HIGH DEGREE OF SPECIALISATION
• TRADE IS NOT A ONE-WAY STREET
• THE RICH CANNOT REMAIN RICH IF HE HAS POOR
  NEIGHBOURS
• 2. THE DECISION-MAKING ARGUMENT
• MEMBER STATES ARE RESPONSIBLE FOR THEIR POLICIES
• CAN THEY SOLVE THEIR ECONOMIC PROBLEMS ALONE?
• THE ECONOMIC PLAYERS ARE DECIDING MORE AND MORE
  SUPRA-NATIONALLY

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THE ECONOMIC ARGUMENTS

• 3. THE IN-EFFICIENT INSTRUMENT ARGUMENT
• THE FOUR FREEDOMS
• POLICIES AND INSTRUMENTS - FOR DOING WHAT?
• THE INSTRUMENTS ARE BECOMING BLUNT!
• EXAMPLES gt THE EXCHANGE RATE gt PUBLIC
  DEMAND POLICIES
• 4. THE WORLD-COMPETITION ARGUMENT
• THE LARGE INTERNAL MARKET ARGUMENT gt
  SPECIALISATION
• THE ECONOMIES OF SCALE ARGUMENT
• EXAMPLES gt PRODUCTION OF TELEVISION SETS
  (1950ies) gt THE JAPANESE CONCEPT

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THE ECONOMIC ARGUMENTS

• 5. THE CURRENCY SPECULATION ARGUMENT
• THE VOLUME OF DAILY TRANSACTIONS ON THE EXCHANGE
  MARKETS
• UNCERTAINTY ABOUT EXCHANGE RATES WITHIN AN
  INTERNAL MARKET gt COSTS, gt INVESTMENTS?
• UN-NECESSARY RISK BETWEEN ECONOMIES WHICH ARE
  INTERDEPENDENT gt PRE-CONDITION CONVERGENCE!
• 6. THE WORLD-CURRENCY ARGUMENT
• EURO HAS LARGER VOLUME THAN DM
• LARGER MARKETS - LESS FLUCTUATIONS
• INVOICING IN THE HOUSE CURRENCY gt NO RISKS
• DISPOSAL OF AN INTERNATIONAL TRANSACTION AND
  INVESTMENT CURRENCY MORE INSTRUMENTS - LOWER
  COSTS
• AN INTERNATIONAL RESERVE CURRENCY WITH ALL RISKS
  AND BENEFITS

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A SINGLE CURRENCY -WHAT ARE THE CHALLENGES?

• gt ECONOMIC COHESION
• gt SOCIAL COHESION
• gt POLITICAL COHESION

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A SINGLE CURRENCY -WHAT ARE THE CHALLENGES?

• ECONOMIC COHESION
• EMU EFFECTS
• INTERNAL STABILITY
• gt PRICE STABILITY
• gt THE THREE ACTORS
• CO-ORDINATION OF POLICES
• gt APPLICATION OF THE PRINCIPLE OF SUBSIDIARITY
• gt REPARTITION OF COMPETENCES
• gt FRAMEWORK DECISIONS
• gt STRUCTURAL POLICIES
• gt REGIONAL POLICIES
• gt SOCIAL POLICIES

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A SINGLE CURRENCY -WHAT ARE THE CHALLENGES?

• SOCIAL COHESION
• gt CONCENTRATION PROCESSES OF ECONOMIC ACTIVITIES
• gt EMPLOYMENT
• gt UNEMPLOYMENT
• gt THE ONE WHO WANTS TO SELL NEEDS BUYERS!
• gt SOLIDARITY VERSUS INDEPENDENCE

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A SINGLE CURRENCY -WHAT ARE THE CHALLENGES

• POLITICAL COHESION
• gt INSTITUTIONAL ASPECTS gt DEMOCRATICALLY
  CONTROLLED INSTITUTIONS gt EFFICIENT INSTITUTIONS
• gt POLITICAL ASPECTS gt REPARTITON OF
  COMPETENCES gt ORGANIZING A MULTI-CULTURAL
  COMMUNITY? gt CHARTER ON FUNDAMENTAL RIGHT gt
  EUROPEAN CONSTITUTION

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A SINGLE CURRENCY?

• CONCLUSION

ECONOMIC AND MONETARY UNION IS ONLY ONE PART OF
THE EUROPEAN INTEGRATION PROCESS!
THERE ARE MAJOR POLITICAL AND ECONOMIC REASONS!
A SINGLE CURRENCY NEEDS A DEMOCRATIC AND
EFFICIENT POLITICAL FRAMEWORK! THE POLITICAL
DISCUSSION HAS ONLY STARTED!
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A SINGLE CURRENCY MEANS gt CENTRALISED MONETARY
POLICIES AND gt POLICY CO-ORDINATION !
BUT DOES NOT MEAN THAT WE CANNOT BUILT EUROPE
- FROM THE BOTTOM-UP! - DEMOCRACY, SOLIDARITY
AND SUBSIDIARITY START AT THE LOCAL LEVEL, IN
THE SMALLEST POLITICAL ENTITY DEMOCRATICALLY
ELECTED!
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 EURO-LAND België/Belgique, Deutschland,
Ellas, España, France, Ireland, Italia,
Luxemburg, Nederland, Österreich, Portugal,
Suomi/Finland

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Euro Conference
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Euro Conference
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Euro Conference
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Euro Conference
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Euro Conference
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Euro Conference
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Euro-Conference