Bank's authority will increase, Governor says
Saturday 30 January 1993
Mr Leigh-Pemberton said that he expected EMU to be achieved 'at some time' but the path to it would have to be 'pragmatic, free of political prejudice, and on the basis of independent central banks'.
The Governor was critical of several features of the exchange rate mechanism as it had operated before September 1992 when the Italian lira and sterling suspended their membership. He made three main criticisms.
First the upward pressure on the anchor currency, the German mark, had combined with weakness of the dollar to create excessive strains in the exchange rate mechanism. While he still believed that sterling at DM2.95 was a reasonable rate at that time, it was clear that the pound at dollars 2 was not.
Second, there had been excessive rigidity of parities as governments had been 'mesmerised' by the apparent success of the ERM between its last big realignment, in 1987, and September 1992.
Third, there was the 'almost accident' of the Danish referendum, which made people question the goal of EMU, towards which the European currencies were supposed to be heading.
The lessons were that the ERM must be much more flexible, and that there should be a greater frankness of discussion about disequilibrium before governments forced markets' hands.
Looking ahead, there had to be a new attitude of commitment; if a parity was sustainable, it should be defended, but if not, governments should face the fact.
The need for changes to the ERM was also recognised by Helmut Schieber, a board member of the Bundesbank. Speaking immediately after Mr Leigh-Pemberton, he called for 'timely and more frequent realignments' of ERM parities. The European Monetary System was not the same as economic and monetary union; it was 'a system of stable currencies, not stable exchange rates'.
However, it made it clear that the EMU goal should be retained despite the problems of the exchange rate mechanism. The troubles of recent months were an argument for monetary union, not against it.
- 1 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 2 50 books for students to read this summer: From Ernest Hemingway to Gillian Flynn
- 3 McDonald’s removes chicken nuggets from the menu in Hong Kong amid major food scare
- 4 Students offered grants if they tweet pro-Israeli propaganda
- 5 Joey Barton and Yossi Benayoun become involved in Twitter row over Israel-Gaza conflict
Israel-Gaza conflict: Israeli targeting policy under scrutiny after shellfire hits a mother and child, a school full of refugees and a doctor’s home
Metallica drummer Lars Ulrich claims Noel Gallagher helped him kick his cocaine addiction
Peaches Geldof: Her final day – and her fatal decision
Iraq crisis: Isis orders Mosul shop keepers to cover mannequins
Students offered grants if they tweet pro-Israeli propaganda
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
iJobs Money & Business
£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
£18000 - £25000 per annum + OTE £40,000: SThree: Huxley Associates are looking...
Negotiable: Harrington Starr: Graduate C# Developer (.NET, ASP.NET, HTML, SQL,...