Tietmeyer blueprint for EMU

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HANS TIETMEYER, the Bundesbank president, pressed yesterday for a future common European monetary policy in the image of that now pursued by the German central bank. A medium-term strategy based on money supply growth would benefit a future European central bank as it sought stability, he said.

Mr Tietmeyer was using an address to bankers in Oldenburg to bolster the Bundesbank's position as European Union members debate the role and instruments of a common monetary policy. At the same time, he issued a warning to governments and central banks that would like to see the European Monetary Institute acquiring greater influence before the final stage of monetary union: 'One cannot divide responsibility for a currency. Either it stays clearly with the national central banks, or one has to hand it over completely to a supranational institution. Any halfway solution will cause confusion.'

The Bundesbank's instrument of minimum reserve requirements, which is used to control monetary growth, would be 'indispensable' for EMU, he said. Minimum reserves slowed down monetary creation by tying a portion of commercial bank assets to the central bank, he argued. They could also be used as a liquidity buffer to smooth extreme fluctuations in the money markets. Noting that some EU central banks do not use minimum reserves, Mr Tietmeyer said introducing them would be very time-consuming.

He said the Bundesbank would seek to have its other monetary instruments, including the discount-rate policy, taken on by a European central bank.

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