New European Central Bank Launched
Party in Frankfurt: Don't worry. Be happy.
BERLIN - In a festive launch for what may emerge as one of the world's most powerful institutions, European leaders celebrated the birth Tuesday of the European Central Bank. It will serve as guardian of the single currency known as the euro when it comes into effect at the start of next year.
At a glittering ceremony in Frankfurt, which will serve as the bank's headquarters, Wim Duisenberg, its president, acknowledged the heavy responsibility facing the bank when it begins to set interest rates for the euro on Jan. 1.
By 2002, the national currencies of Germany, France, Italy, Austria, Spain, Portugal, Finland, Ireland, Belgium, Luxembourg and the Netherlands will disappear.
The bank represents an extraordinary leap of faith by the 11 countries that will inaugurate the euro. It marks the first time that countries have voluntarily surrendered control over such a precious piece of sovereignty as their own money to an independent council that does not have to answer to any government.
Mr. Duisenberg said that the paramount priority of the fledgling central bank would be to keep inflation low and to gain the confidence of European citizens, who are nervous about giving up their marks, francs and lira for a new and untested form of money.
He said that it was vital for monetary policy to be ''one and indivisible'' and ''characterized by a truly European outlook.''
Chancellor Helmut Kohl of Germany, who has been the driving force behind the single currency project, said the euro would have an immensely positive impact on the global financial system and the quest for European unity. Even though a majority of Germans are still dubious about the wisdom of sacrificing their cherished Deutsche mark for the euro, Mr. Kohl said it would provide an invaluable link among 300 million people who earn about a fifth of the world's income.
''With the euro we will develop a new feeling of togetherness,'' Mr. Kohl told an audience of bankers and dignitaries who gathered to toast the single European currency. ''Europe will have concrete new meaning for people because money is more than just a means of exchange. It is also a part of cultural identity and a tool for political stability.''
He contended that ''Euroland,'' as the monetary domain is called, would rapidly attract investors seeking a haven for their capital from the turmoil in Asia and other unstable markets.
''The international world of finance has already shown great faith in the single European currency, even six months before it will be introduced,'' Mr. Kohl said.
Rebutting Mr. Duisenberg's insistence that the euro must not compete with the dollar as the world's leading reserve currency, Mr. Kohl said that it already is gaining credibility throughout the world as an alternative to the dollar.
He said that the euro's virtues were so appealing that Denmark and Britain, which have refused to abandon their national moneys, would soon be compelled by financial logic and self-interest to embrace the single currency.
Prime Minister Tony Blair of Britain, which passed the six-month presidency of the European Union to Austria on Tuesday, wished the euro every success but refused to make any commitments about when his country would adopt the single currency.
He said that if Britain joins, it would do so after careful consideration of its national interests and after voters have been consulted in a referendum.
Despite the rapturous rhetoric surrounding the launch of the European bank, there were still important matters left to be resolved before it starts operations by the end of the year. Mr. Duisenberg, a 62-year-old Dutch banker and former finance minister, offered no clues how the bank would handle such contentious issues as the transfer of gold reserves from national central banks.
He was appointed in May after a messy squabble between his supporters, led by Germany, and France, which wanted the bank's presidency for its own candidate, Jean-Claude Trichet, governor of the Bank of France.
A compromise was reached when French officials said that Mr. Duisenberg had agreed to step down halfway through his eight-year term in favor of a French successor. But since then, Mr. Duisenberg has balked at setting a firm date for his retirement.
In addition, there are still questions hanging over the bank's decision-making and the degree of consultations with member governments.
To ensure its full independence, Germany demanded that the bank must be insulated from political pressures in setting interest rates. But France insists the bank must remain sensitive to the pernicious risks of high unemployment and not just worry about inflation.
International Herald Tribune, July 1, 1998 |
