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."

Start your day with The Independent, sign up for daily news emails
Two christmas trees ,Moonbeam (2L), Moonchester (2R) and Santa Claus outside the Etihad Stadium
footballAll the action from today's games
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Life and Style
food + drink
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas