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International Herald Tribune - 14 octobre 1997
Along With the Euro, a Fresh Political Agenda
By Valéry Giscard d’Estaing and Helmut Schmidt
Paris – The markets are justified in believing that European monetary union will come into force on schedule on Jan. 1, 1999.
At their recent meeting in Weimar, Helmut Kohl ant the two French leaders, Jacques Chirac and Lionel Jospin, solemnly pledged to respect that date. Since the German and French economies are in an obvious situation of convergence with the necessary criteria, adoption of the European currency can be considered a certainty.
The debate on the criteria of convergence has been helpful in emphasizing the absolute necessity of sound public finances. We all must support the efforts and honor the sacrifices achieved to this end. But this debate, which occasionally drifted into childish minutiae, diverted attention from more fundamental issues.
What is at stake is not only adopting the euro but also making it a success. It can be done by building a stable currency, well received by the people and the businesses concerned, that is irrevocably the only currency of the member states of monetary union.
To make this work, it is essential to reassure German opinion. The German people have been bankrupted twice in this century by monetary upheavals, at the end of World War I and then again after World War II. German’s confidence has been built on the remarkable strength of the Deutsche mark. Consequently, they can be asked to exchange it only against a currency that offers the same guarantee of strength.
Thanks to the legal and political independence of the European central bank, German public opinion should be assured that such strength will indeed be achieved.
Together the French and the German GNPs account for a strong majority of the monetary union’s GNP, or around 60 percent. At this writing, the inflation rate and the long-term interest rates are lower in France than in Germany. The conditions of monetary stability are therefore met.
The objections raised by France about the “stability pact” have been inopportune in the sense that they led German public opinion to question French resolve for irrevocable commitment to monetary stability. Henceforth, we believe it would be useful for the German and French leaders to adopt a consistent, mutual commitment to the stability of the euro.
Past devaluations and revaluations have been important means of adjustment and correction of the differences between European states. Such means will disappear with the adoption of the single currency. In the absence of modifications of exchange rates, adjustments will then take the shape of economic and social tensions, dislocations, movements of people and different unemployment rates.
Obviously, these tensions will have to be kept within bearable limits. In choosing the participating states, acceptance should thus be based not only on the formal respect of arithmetical criteria but also on the will and ability of participating states to pursue economic and social policies similar enough to avoid the emergence of tensions that could shatter the whole system.
On the other hand, common monetary policies at the single currency will automatically lead to greater economic integration and less divergence in business cycles.
In the longer run, success of the single currency will depend on further political progress. Without such improvement, changes of governments, always possible in one or the other state, could challenge the solidity of the union.
The European central bank must clearly be independent. We have asserted that from the beginning. But this does not mean that it may be cut off from any economic and social surroundings. There is a difference receiving orders from governments and explaining reasons and the fundamentals of the central bank’s monetary choices.
The example of the United States is worth noting here. The Federal Reserve System is independent, but it is neither isolated nor mute. The statutes of the European central bank provide that its president and vice president shall have the authority and skill to mobilize consensus among the relevant constituencies around monetary policy.
The form of “further political progress” in the European integration process has yet to be decided upon. One could have expected it from the Amsterdam treaty, but the participants were not able to agree on reforms.
One must never forget the monetary union which the two of us were the first to propose more than a decade ago, is ultimately a political project. It aims to give a new impulse to the historic movement toward union of the European states. Monetary union is a federative project that needs to be accompanied and followed by other steps. It was never meant to remain an isolated islet in the midst of the whirlwind of national interests.
Additional steps beyond those already agreed upon by the member states of the European Union can most efficiently by discussed among those states who have decided to fully play the game of monetary union.
That is why we advise that the German and French leaders take the initiative in convening a conference of the member states of monetary union, including the president of the European Commission, as soon as the list of participants has been drawn up, to decide what political steps will have to be agreed upon to accompany the launching of the single European currency.
Mr. Giscard d’Estaing, the former French president, and Mr. Schmidt, the former West German chancellor, are co-chairmen of the Committee for the Monetary Union of Europe. They contributed this comment to the Global Viewpoint service of the Los Angeles Times Syndicate.