EMU depends on strong political links

Diane Coyle discovers the challenges facing the man preparing Europe for a single currency; THE MONDAY INTERVIEW; Alexandre Lamfalussy

It is no surprise that Alexandre Lamfalussy, the Belgian banker in charge of preparing Europe for the single currency, is optimistic about its introduction in less than two years.

What is more remarkable is his new willingness to link the success of monetary union to political integration, with a frankness unusual in central banking circles. In an exclusive interview with The Independent, Mr Lamfalussy highlighted the need for wide policy co-ordination as the biggest potential hurdle in the way of the successful operation of European monetary union.

He said: "We need closer economic and political co-operation. I don't want to say political union because its content is vague... but there will be areas in which we have to get closer. That will be forced by monetary union and that is the greatest challenge."

It is a view likely to confirm the worst fears of Britain's Europhobes. It also reconciles French demands for a "stability council" which would give finance ministers a strong voice in economic policy and German determination that the new European Central Bank will be as independent and tough as the Bundesbank.

There would need to be explicit co-ordination of fiscal policies, on top of the harmonisation of taxes that was already under way within the single market, Mr Lamfalussy said. Speaking from the European Monetary Institute's eyrie high above the snow-bound streets of Frankfurt, he said: "This is a unique enterprise. All of this is experimental."

Mr Lamfalussy's other, equally strong, message for Europe's politicians is that they are wrong to blame high unemployment and stagnant growth on the need to meet the Maastricht criteria. Soaring government debt levels meant the unpopular measures governments on the Continent were taking to reduce government deficits would have been essential anyway, he argued.

On the use of Maastricht as the culprit, Mr Lamfalussy said: "It is a mistake from a tactical point of view because it discredits EMU in the eyes of the public."

He concedes that the single currency has prodded governments into action: "Maastricht was welcome because it puts you against a deadline."

But he regrets the negative associations the M-word has come to have in the public mind. "This is unfair and regrettable," he said.

For all his alertness to the political forces driving progress towards the single currency, Mr Lamfalussy insisted that the European Central Bank he was busy bringing into being would be independent of politicians' influence. But the personality of its first executives would be crucial, he said.

"There is a high probability that the ECB will be able to resist very successfully any political pressure. That there will be political pressure is clear."

He added: "There is no doubt the choice of people will matter a lot."

Apart from the defence provided by its statutes, which guarantee independence, Mr Lamfalussy said the ECB's strongest card was the existence of a culture of price stability in Europe.

"The policy of combating inflation is already there. We have achieved price stability in a growing number of countries. It has already happened," he said.

For the same reason, he denied suggestions that the ECB would have to start out being extremely tough in its interest rate decisions in order to establish its credibility. The credibility already exists, in his opinion. "Why, when you come together, should you suddenly start to behave in a different way?" Mr Lamfalussy did not, however, accept the view widespread in Frankfurt that monetary union would necessarily exclude the Mediterranean countries to begin with - a diplomatic stance, perhaps. Although the presence of Italy and Spain at the start would raise doubts in the financial markets about credibility, Mr Lamfalussy said: "We do have a reasonable chance that quite a number of countries will meet the budget commitment."

He denied, too, that this could only be achieved by letting standards slip. "To say now that we will have to fudge is going a little bit too fast. By the summer we will begin to see the likely outcome," he said.

Like many others on the Continent, he hopes for a clearer view of Britain's position by then too.

"I would be delighted if the UK joined," he said. "Monetary union would be poorer without Britain."

people'It can last and it's terrifying'
Danny Welbeck's Manchester United future is in doubt
footballStriker in talks over £17m move from Manchester United
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
footballFeaturing Bart Simpson
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
The five geckos were launched into space to find out about the effects of weightlessness on the creatures’ sex lives
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
ebooksAn unforgettable anthology of contemporary reportage
news Video - hailed as 'most original' since Benedict Cumberbatch's
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Arts and Entertainment
Word master: Self holds up a copy of his novel ‘Umbrella’
boksUnlike 'talented mediocrity' George Orwell, you must approach this writer dictionary in hand
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor