Prince Henri Auditoire 02 BW

Economic Policy in the Framework of Accession to the European Union and the Economic Monetary Union - Yves Mersch

Intervention de Yves Mersch à la conférence organisée en commun par la délégation lituanienne de la Commission européenne,
le Ministère des Finances de la Lituanie et la Banque de Lituanie

Luxembourg, le 9 février 2001

Seule la parole prononcée fait foi.

Ladies and gentlemen,

May I first thank the organizers for having invited me to this outstanding Conference. I remember my last visit in Lithuania in May 1998 in my capacity as Head of Treasury in the Ministry of Finance, cooperating closely with the Banking Training Institution in the field of technical assistance. Today, as a member of the European Central Bank Governing Council, I am glad to see the Eurosystem's involvement in the accession process, providing assistance to the Eastern and Central European Countries' Central Banking Community in essential fields such as monetary policy, foreign exchange policy, statistics, payment systems and legal issues, especially the ones pertaining to Central bank's independence.

There is an indisputable recognition that the ongoing process is the result of a political decision and the Eurosystem is willing to play its role in this transition process. In that framework, let me underline the successful high-level policy dialogue framework that has been set up at the Helsinki Seminar in November 1999, extended through the Vienna Seminar held last year and perpetuated by the forthcoming Seminar at the end of this year in Berlin. The Eurosystem's stance towards accession has clearly been put forward in our position paper released at the Helsinki Seminar, updated in December 2000. Let me take this opportunity in order to outline the main guidelines. First, in line with my precedent remark, the Eurosystem will only focus on the topics falling in its exclusive or shared fields of competence. Second, the Eurosystem adopts on open attitude, thus having a positive standpoint towards accession of future European Union members.

We all have to pay tribute to the considerable efforts that have been achieved by accession countries. However, some considerations beyond strict economics might be worth some reflection:

First, the accession process should not constrict itself to short-term analyses of compliance with the Maastricht criteria. It is true that the future entry into the Euro area is founded on the strict and sustainable fulfillment of these convergence criteria, the same way actual Euro area members had to comply with them in order to be eligible. However, accession countries also should pay attention to the more structural Copenhagen criteria encompassing political and economic criteria as well as the implementation of the so-called "acquis communautaire".

Second, the accession process also is a question of meeting of minds. Adopting the Euro in the long term implies a significant responsibility, namely the management of a currency of hopefully by then more than 400 million people. This management is not a domestic one, based on national interests nor the sum of national interests, but a wider one, based on common interests applying to a whole area locked into a Community of solidarity and destiny. Those inside this Community will accept comanagement of their destiny and of one of the world's leading currencies not only on the basis of mechanistic criteria or point landing capacity of a national economy; the criteria have the deeper sense to convince that the declared and shared objectives will be even better achieved after the accession through a symbiosis of institutional and philosophical functioning.

Let me conclude my short introduction by saying a few words on our own experience. Luxembourg often has been considered as being an experimental laboratory for Monetary Union in Europe. After the exit of the Zollverein, Luxembourg proposed France as an economic ally. Following the French refusal, through referendum, Luxembourg finally entered into an economic Union with Belgium, encompassing a monetary association, in 1921 (Belgian-Luxembourg Economic Union Treaty). The parity between Luxembourg Francs and Belgian Francs was not established by way of a Treaty nor a law, but an emergency decree of Government that could be repealed without formality.

Therefore at each readjustment inside the European Monetary System, the Luxembourg Franc was fixed in the bilateral grid in relation to all other participating currencies and could in theory have breached its parity with the Belgian Franc.

The monetary association between Luxembourg and Belgium could not be considered a comparable model to Economic and Monetary Union:

Belgian Francs and Luxembourg Francs circulated in parallel and were not meant to be replaced in fine by a single currency;

There was no representation of Luxembourg inside the Banque Nationale de Belgique;

Luxembourg had unilaterally ceded the operational activity of a central bank to the Banque Nationale de Belgique.

After the Banque centrale du Luxembourg (BcL) was established in June 1998, it had to face a considerable challenge in entering Economic and Monetary Union (EMU): It was handled because the administrative and political activities of central banking had been prepared in parallel with all other European countries since the Werner Plan of the seventies and through the establishment of a Monetary Institute in the eighties, while the operational tasks were mastered through extensive recourse on staff from the private financial and banking sector which in Luxembourg has a history of high professionalism. Despite its small share in the European Central Bank (ECB) capital, the BcL channels between 7 and 10% of the Euro zone liquidity. Size doesn't matter to a successful transition.

Thank you.