The role of the Euro
Tuesday night saw both CNN and the BBC running the press conference of Angela Merkel and Nicholas Sarkozy on the need for reforms in the European Union and the Euro. Although I normally channel hop at this point, it proved to be quite apposite because the following day I was going to a public lecture on “The stability of the European currency area, (Eurozone), and the international role of the Euro.”
To be honest, I am not really sure what I was doing there; economics and international finance is not exactly my forte. I seem to have got onto someone’s list and received invitations to two lectures this week; this one and another on the future of the Bretton Woods institutions: the World Bank and International Monetary Fund. I had a prior engagement and so couldn’t go to the other, although this one looked as if it might be both topical and interesting given the current situation in the financial world.
So, I signed up and off I went.
I’m not sure how it was to be a “public” because it was held in a conference room in the National Bank, and your name had to be on a list to be admitted. I must admit that when I skimmed the invitation I saw that it was ion the National Bank on Umatelieva Street and missed the note that it was on the intersection with Bokonbaeva Street. I thought to myself, “I know where the National Bank is,” and headed off to the building on the intersection of Umatelieva Street and Prospect Chui. Fortunately, I left in plenty of time because when I got there I was told the lecture was to be given in the second corpus of the bank, about 4 blocks away. I managed to hitch a ride with the bank’s shuttle bus and arrive in time for the scheduled 9:30 start.
I got a bit anxious at first as the security guard could not find my name on the list and was about to send me away when he suddenly said, “Oh yes, there you are,” and put a tick against a name which I presume was mine. I needn’t have worried, however, as this is Kyrgyzstan where everything regularly runs late, and we were kept waiting outside the hall for over half an hour before being admitted.
The second corpus is a new building and the conference hall is a long narrow room with tables down one side. The walls looked freshly painted, white, and there were engravings from the famous Hertzen series of lithographs based on the Manas epic on the walls. I chose a seat at a table without a microphone, just to act as a deterrent to asking a question and showing myself up, even though the Deputy Chairman of the bank said in his opening remarks, “We have a principle here that there are no such things as “stupid questions”, just questions”. The other 30 or so people in the room, on the other hand, were young and intense and obviously had a better knowledge of the subject matter than I did. Many of them were also employees of the National Bank and I couldn’t help thinking that they had a vested interest in “making their mark” by asking pertinent questions and I thought it best to leave it to them to do so.
The speaker, a professor from the University of Grenoble, spoke in French, although the slides in his presentation were written in English, and an interpreter translated him into Russian. My French is not good, so I was happy to have the Slides to fall back on, but as he didn’t really speak to them just used them as an aide memoire to give him a structure, I found myself relying heavily on the translation.
It must have been a difficult to translate for him. For a start, the topic was quite specialized and his subject matter was quite specific and detailed, but he tended to speak for quite a long time between the translations, so there was a lot to remember each time. As I said, my French is not very good, but I think the interpreter did quite a good job.
It seems as if the talk was based a chapter he has prepared for an upcoming book. There were two main parts to the lecture: Where are we now?, in which he outlined the role of the International Monetary System, (IMS), the history of the development of the Euro together with its various supporting mechanisms and the history of its as an international currency competing with the US dollar; and What needs to be done if the Euro is to develop as a viable alternative to the US Dollar as an international currency?
I found much of what he said, (in both sections of his talk), interesting, especially about what I consider to be the great weakness of the Euro.
The United States, for example, is a huge economy and parts of the country experience completely different economic conditions, (compare, for example, California, whose economy is bigger than that of some countries, and Louisiana), but as a whole the country is one country, with one central bank one government, (whatever personal opinions one might hold about it), and one overall policy, (however effective it might be). It’s also been around for a long time and has become the international standard, (many currencies and commodities are pegged to the US dollar in one way or another), and it is able to benefit from habit and inertia of people working in the financial sphere – it’s “the devil we know”.
The Euro represents an geographical area and economy which in many ways is as large and diverse as that of the US, but it is a new amalgamation of twenty odd national currencies, from different countries, each with their own central bank and government following individual policies suited to meeting the needs of their own population.
He suggested that in order for the Euro to take its place as an international currency in the International Monetary System, there were certain essential prerequisites which included accepting political decisions about cooperation and coordination between these different economies – much the same as Merkel and Sarkozy were saying in their press conference.
Bishkek