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Stability Is Our Goal By Hans Tietmeyer, president of the Deutsche Bundesbank.

WSJ December 31, 1998, excerpts

The national central bank governors in the ECB Governing Council are not representatives of their respective national interests. They are members of the ECB Governing Council ad personam, that is to say, they must not follow instructions from their own governments or central banks. They are all committed to the pursuit of one single goal: the lasting stability of the euro.

The single monetary policy will be a particular challenge, especially during the initial period of European economic and monetary union, because the economies and the financial and banking systems of the euro countries will still have their different structures and national traditions. Monetary policy decisions may therefore have different effects in the various states.

Another point is that, in contrast to what happens in the United States for example, most decisions in other spheres such as economic, fiscal and social policies will be taken at national levels. There is no comprehensive union-wide budget, no common tax system, no union-wide social security system and no sizable financial-equalization scheme among the member countries.

For those reasons, monetary union requires a certain degree of coordination of the national policies as well as adequate flexibility and inventiveness in business. Yes, it is true that there are regional differences in economic development even within present nation states. There is, for example, a difference within Germany between east and west. However, various national instruments are designed to level out such discrepancies. But these instruments are not available in the European context and are not envisaged in the Maastricht Treaty, either.

It is therefore important that the EMU member states continually pursue stability-oriented economic and fiscal policies so that internal tension is ruled out as far as possible from the outset. Furthermore, the member countries must be able to react flexibly to new situations and challenges because in the monetary union the exchange-rate instrument and differences in monetary policy will no longer exist.

The demands which EMU makes on those responsible for monetary policy are also great. The ECB Governing Council--which consists of the six members of the ECB Executive Board and the governors of the 11 national central banks--must therefore use its authority and independence from the beginning so that the stability of the euro as the primary objective of monetary policy is guaranteed.

The reference value of 4.5% which the ECB has already set for the growth of the euro M3 money stock provides sufficient scope for exploiting production opportunities and for an inflation-free economic growth rate in the coming year.

The euro will provide Europe with a great historical opportunity which will extend beyond the monetary field. It is a chance for more economic flexibility and dynamism, for greater and longer-lasting political unity. In short, it will create an economically competitive and politically united Europe.

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