Out of Brussels: Following the rabbit into wonderland

AT A TIME of crisis such as this, you would imagine that the central banks of Europe would have all hands on deck, frantically bailing water from the leaky boat of the European Monetary System. But international finance moves in mysterious ways. Senior central bankers from the EC's 12 member states were called to Basel earlier this summer - on 29 June, to be precise - to discuss the Ecu banknote.

Basel? The Ecu banknote? One could be forgiven for thinking that the bankers had let enthusiasm for the cause of a single currency go just a little too far. Their meeting took place only weeks after Denmark had turned down the Maastricht treaty.

Now, with one realignment of the European Exchange Rate Mechanism already conceded and another under speculation in the dealing rooms of New York, London and Tokyo, the idea of discussing Ecu banknotes seems all the more premature. Throw in the fact that central bankers are far more sceptical of the single currency than their political masters (the Bundesbank president, Helmut Schlesinger, the guardian of German monetary rigour, has almost said as much in recent weeks) and the fact that it has not yet been agreed what a single European currency would be called, and it all begins to sound like a financier's belated April Fool.

The notion of a meeting in Basel confirms the impression, for Switzerland is not even a member of the European Community, even though it has made a very polite application to join. So what on earth did the bankers think they were up to?

The answer is that they were just doing their jobs, as loyal civil servants must. True, the bankers have no idea whether the notes under discussion will ever be anything more than Monopoly money; true also, they are equally in the dark as to whether the notes are to be called Ecus, Euromarks or Monnets. But if there is to be a single currency by the end of the century, the nuts- and-bolts preparations for it have to start now.

So senior officials from all over the Community have put on one side their very real doubts about the whole exercise and followed the Ecu rabbit into the wonderland of a single currency. The bankers met in Basel because that is the seat of the Bank for International Settlements, which they visit periodically for meetings and where they can be safe from the cohorts of reporters who come to every EC ministerial meeting.

A representative of the European Commission and a rapporteur from the BIS itself sat in on their discreet deliberations. 'We're happy to leave the political decisions to the politicians,' one of those present said last week. 'My mandate is to get into a position where, depending on the timing and the route, we can produce the right number of banknotes in the right denominations.'

One thing has already been decided. It might seem helpful to familiarise Europeans with their new currency by letting the banknotes circulate for a few years alongside the 11 existing EC currencies (Belgium and Luxembourg share one between them). But the Bundesbank would not wear that: a 12th currency would add to liquidity and make inflation still harder to control than otherwise. So the job must be done in one go.

The bankers are considering four options: at one extreme is a single set of banknotes, perhaps printed in different Community countries but identical. A second option is to print on each note some small sign (just like the seals of the different reserve banks of the United States) to indicate where it came from. A third is to print notes with Ecu wording on one side and national wording on the other.

Finally, there is a way of throwing a sop to national pride by issuing notes that are basically national notes, but contain a small symbol denoting the single currency.

That, however, is most difficult of all: to avoid having to issue notes for fractions of an Ecu, the central banks would have to fix their different currencies at an exchange rate of one to one before moving later to a single currency. Such an exercise would make Britain's decimalisation seem like a picnic.

After only one meeting, the committee is still at the stage of trying to find out what kind of notes, and how many of them, are now in circulation. But they are preparing for a long haul. Once they have this information in front of them, the bankers will be ready at their autumn meeting to start talking about security precautions to make the new notes as hard to forge as possible.

Then they will have to decide the rules of a competition to choose the best designs. Then the makers of cash-point machines have to be brought in.

Oh, yes, there's lots to be done if Europe is to have its single currency by the end of the century.