European Monetary Union

The AMUE network of members

The Association for the Monetary Union of Europe (AMUE) was founded in 1987 by European business leaders who agreed on the objectives of a common currency and monetary stability for the success of the Single Market.
The AMUE is a private sector non-political group which is active in all 15 Member States of the European Union. Its headquarters are located in Paris. The approximately four hundred companies and banks which are members of the Association globally employ nearly 9,000,000 people. Small and medium-sized companies participate in the activities of the AMUE most often through professional organisations such as the Federations of Dutch, Greek and Swedish Industries, the French and Spanish Chambers of Commerce, the Belgian, Irish, Italian and Spanish Employers' Confederations, as well as their European umbrella organisation, UNICE.
The AMUE is a non-profit organisation financed by yearly contributions from its members and through partnerships:
·founding members may join at any time; their particular support is highlighted in publications, public conferences, seminars and other AMUE activities;
·active members benefit from all services of the Association;
·subscribers receive AMUE documentation, but may be invited to share expenses when participating in activities;
·partnerships include contracts with public authorities such as the European Commission and Parliament, or governmental bodies.

Making the euro a success

Making a success of the euro, and contributing to a cost-effective transition to the new single European currency, have long been the central objectives of the Association for the Monetary Union of Europe.
In the years following its foundation in 1987, the AMUE was instrumental in convincing politicians of the need for monetary and exchange rate stability, a single European currency and a definitive deadline for the start of Economic and Monetary Union.
From 1992 to 1998, the Association played a very active role in establishing the credibility of monetary union, in improving the awareness of governments and Community institutions of the practical steps needed to introduce the single currency, and in facilitating the preparation of businesses for the euro. Among its main activities, the AMUE participated in official expert groups and helped to formulate the final transition scenario, organised numerous workshops on corporate preparations for the euro, took part in thousands of information seminars on the issue and wrote and distributed millions of practical preparation guides. During this second phase of its existence, the Association also published a number of academic studies and reports which helped to counter euro-scepticism and demonstrate the long-term sustainability of the euro.
Now the Economic and Monetary Union has entered a new phase during which its main challenge is to ensure that it yields all of the benefits expected of it by companies, banks, workers and consumers. The AMUE can play a very constructive role during this phase in contributing to the success of EMU by:
·assisting the corporate sector with the transition to the euro,
·facilitating access to EMU for late-comers, from the European Union and future member states,
·suggesting measures for the stability of financial markets, especially in transatlantic relations, and in countries which are candidates for European Union membership - a new area of activity for the AMUE.
The AMUE is uniquely qualified to contribute to the achievement of these goals:
The Association has an exceptional consultation network stretching across the European Union, and can easily draw on the experiences and expectations of the large businesses, banks and business organisations which are its members. All agree on the necessity for monetary stability and fair competition world-wide, as a means to increase productive investment and economic growth.
They are leaders in their industry and exercise a strong influence on colleagues and smaller businesses. The strength of the AMUE lies in the long-term co-operative commitment of its members in Europe.
The Association is recognised as a strategic European corporate think tank, with the capacity to suggest precise actions to the corporate sector and to governments. Many of the arguments which led to EMU also apply to greater stability in international monetary relations.

The AMUE in action

The AMUE will continue to assist in preparations for the euro at all levels, through its efforts to:

• Facilitate the cost-effective preparation of companies for the introduction of the euro by means of working groups, seminars, a monthly newsletter and the documentation made available on the AMUE web site [Linkleri sadece kayıtlı üyelerimiz görebilir.ForumTR üyesi olmak için tıklayınız]. Actively liaise with public authorities to define practical strategies and solutions for the changeover.
• Develop benchmarking for companies' preparation through the [Linkleri sadece kayıtlı üyelerimiz görebilir.ForumTR üyesi olmak için tıklayınız] website reserved for AMUE members, and in particular identify potential bottlenecks.
• Facilitate timely preparation by retailers and the tourism industry, and foster the acceptance of the euro by consumers.
• Promote monetary union objectives in Denmark, Greece, Sweden and the United Kingdom to encourage their membership of EMU. Facilitate the understanding and the early preparation for the euro of companies in these countries, so that their transition phases may be shortened.
• Inform the business community in Norway, Switzerland and countries which are candidates for European Union membership. Organise events outside Europe to increase awareness and facilitate the early use of the euro world wide.

The international dimension of the euro will modify the global environment and have a wide-reaching impact on world financial markets. It will create opportunities as well as new responsibilities, as the economic weight of the European Union is comparable to that of the United States. « Benign neglect » will not be the appropriate response to this new situation. So the AMUE will now become actively involved in this international dimension and will:

• Develop a dialogue with US and Japanese businesses in order to prevent excessive fluctuations of the dollar/euro/yen exchange rates. The AMUE already counts a number of American and Japanese-owned companies among its members.
• Investigate how to facilitate the stability of the euro's exchange rates with other European currencies, for the benefit of the whole region and the enlargement of European Union.

A way out of of the crises

Economic and Monetary Union (EMU) will make a major contribution to improving Europe's economic performance. Low growth, high unemployment and the need to reduce an ever growing debt burden are not due to 'Maastricht'. They are the long term consequences of earlier policies, which have been aggravated by exchange rate instability in the single market.

The Maastricht Treaty provided a road map for the unification of the currencies of European Union members. But unification requires that monetary policy be operated by a single monetary institution, and many operational issues must be addressed.

THE MAASTRICHT TREATY establishing the European Union (EU) requires EU members to satisfy a number of criteria before joining the economic and monetary union (EMU). ). With the start of EMU, expected in 1999, the currencies of participants will be irrevocably locked and, in time, replaced by a single currency, the euro.
A single currency has to be managed by a single monetary institution. The monetary authority for the system--the European System of Central Banks (ESCB)--will be made up of the European Central Bank (ECB) and the national central banks (NCBs) of the countries that participate in EMU. To pave the way for a European central bank, the European Monetary Institute (EMI) was set up in 1994. Its responsibilities include developing the framework for monetary and exchange rate policy, the ESCB's operational rules and procedures, and the statistical database; preparing the groundwork for issuing EU banknotes; and promoting efficient payments across countries' borders. The EMI will be replaced by the ECB when a decision is taken to move to economic and monetary union.
Maintaining price stability will be the ECB's primary objective, but the Maastricht Treaty defines only in general terms how the ECB should operate: there should be open markets with free competition; the ESCB cannot finance public deficits or buy government securities in the primary markets; and the execution of its operations should be decentralized so that recourse can be made to the NCBs "to the extent deemed possible and appropriate."
The EMI has been focusing on monetary policy strategy, procedures, and instruments. Operating monetary policy will require a uniform stance throughout the monetary union, defined as the equality of interest rate levels in the EMU interbank market. To make this work, monetary policy formulation has to be centralized; instruments and techniques should be harmonized so that monetary policy signals are uniform across countries; and sufficient possibilities for EMU-wide arbitrage should be available so that interest rate changes can be transmitted quickly and uniformly throughout the monetary union. This last condition requires, at a minimum, a same-day EMU-wide payment and settlement system to support wholesale transactions.

Conclusion

The prospect of the EMU has led the EU central banks to put substantial efforts into examining the optimal design of instruments to operate a market-responsive monetary policy. This is taking place against a background in which the conditions of operating monetary policy are very different from those of even a few years ago: financial liberalization, facilitating the movement of financial flows; information system developments, enabling policy signals to be transmitted instantly across entire regions and across financial sectors; a deeper understanding of the implications of central bank independence and price stability as the primary policy objective; and finally, the increasing recognition of the interdependence between the effective operation of monetary policy and an adequate payment system infrastructure.
Although there is no decision yet as to whether a monetary aggregate should be used as an intermediate target, it seems to be agreed that short-term interest rates should be the operational target. The ECB will operate on this target using some combination of reserve requirements, standing facilities, and OMOs (Open Market Operations). The relative emphasis placed on these instruments is likely to depend on a number of factors:
·the degree to which it is held that the ESCB can rapidly establish its credibility by adopting essentially the same instruments as are at present used by the country considered the most successful in its monetary policy in the EU--generally regarded to be Germany;
·the degree of concern over the various possible distortionary effects of reserve requirements. The more these matter, the smaller the emphasis likely to be placed on this instrument;
·the nature of the signals the monetary authorities wish to give to the market--if they wish to give continuous signals, they may rely on OMOs; but if they wish to limit market signals to discrete administered changes, they might seek to establish an interest rate corridor and intervene primarily by moving the bounds of the corridor; and
·the desirable degree of decentralization--if decentralization has a high priority, this may point toward a self-stabilizing system where OMOs may be undertaken rather infrequently.
The development of a pan-EU payment system is an integral part of the preparation for the EMU. Considerable work has been undertaken to develop RTGS systems in the member countries and to link these national systems. A number of issues are under consideration, including remote access and the degree of harmonization needed in the operating procedures of the pan-EU payment system.
These discussions are likely to have important implications for the conduct of monetary policy in other countries too. For instance, the Maastricht Treaty's provisions on central bank independence are already influencing central bank laws in other parts of the world. The resultant withdrawal of some EU central banks from their traditional function of acting as banker to the government may also come under wider consideration. The development of the RTGS system is likely to spur the development of such systems in other countries, in parallel with work done in wider groupings of countries such as the Group of Ten. Decisions reached on the choice of monetary instruments are likely also to have a considerable influence well beyond the countries of the EU.

BIBLIOGRAPHY

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