Magazine article Business Credit

Monetary Policy and Trade Credit Take Center Stage at Global Conference

Magazine article Business Credit

Monetary Policy and Trade Credit Take Center Stage at Global Conference

Article excerpt

From monetary policy in Europe to the nuances of negotiating in Japan, FCIB-NCAM's Global Conference empowered credit and financial professionals with the latest information and techniques available in the field of international trade credit.

The conference attracted top presenters and participants from around the world to New York City, November 13 and 14, 1991, to exchange ideas and practical information.

A leading expert on European monetary policy, Dr. Leonhard Gleske, provided an overview of the changes taking place in Central and Eastern Europe and his assessment of the factors which must be considered before stability and a common currency can be achieved. Gleske, who serves as director of the Bank for International Settlements, Homburg, Germany, said that while it will take some countries longer than others to be in a position to join in a single currency, "with some optimism and provided the political will persists to continue on the road to monetary union, we can hope that at the end of this decade the European Community could have its own single currency."

In the meantime, however, much remains to be done, he said, including establishing policies to combat inflation, encourage competition, and improve the supply side of the economy; setting up a central bank that is mandated under law to conduct monetary policy to ensure stable price levels and is free to set monetary policy independent of government; creating private commercial banks subject to supervision; and achieving exchange rate and balance of payment stablity.

"Foreign investors must know that their profits and capital are at their disposal through unrestricted transfers abroad," he said.

Drawing on Germany's experience in extending the deutsche mark currency area to include the former German Democratic Republic, Gleske noted that the strong members of the European Community must be willing to support the weaker ones.

"This could be taken for granted without further ado in the case of Germany in light of the objective of political reunification and given the nation's feelings of solidarity. We are still a long way from this point in Europe. In other words, the political integration of Europe must go hand-in-hand with economic and monetary integration," he said.

Gleske also traced the origins of the push for a common currency back to the 1950s and the subsequent difficulties which resulted in trying to implement the concept. But some success was achieved under the European Monetary System which tied member currencies to the stable deutsche mark and led the renewed drive toward monetary union.

"How far it will succeed this time and whether it will really lead further than the attempts that have so far been unsuccessful remains to be seen," he said.

Governments must agree to surrender responsibility for monetary policy to European Community bodies and create a central bank system organized along federal lines, he said. While proposals for a European System of Central Banks are currently being discussed, banks of this nature remain a thorny issue for centrally organized countries since an independent public institution that is neither directly nor indirectly responsible to parliament does not fit their existing constitutional systems.

"The heads of states and governments are going to fix the first of January 1997 as the earliest date for putting into force a European Monetary Union, provided a minimum number of member countries will have complied with the most fundamental condition of convergence in terms of price stability, sustainable budget deficits, and public debt," Gleske said.

It is most likely that those European countries with stable economies will lead the way toward economic and monetary union, followed by others later, he said. "Judging by the present state of negotiations, this notion of a two-speed Europe, or even a Europe of several speeds, now seems to be gaining ground after all. …

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