U.S.-European Monetary Relations

By Samuel I. Katz; American Enterprise Institute for Public Policy Research, Georgetown University | Go to book overview

A EUROPE-WIDE PARALLEL
CURRENCY

Roland Vaubel

This paper deals with three aspects of the Optica reports: (1) the relationship between the snake approach and the parallel-currency approach, (2) the attractiveness and prospective speed of penetration of a European parallel currency (EPC), and (3) the implications and desirability of attempts to restrict real exchange-rate changes between the currencies of members of the European Communities. The paper cannot go into the details of how the parallel-currency approach could best be implemented, because fundamental adherence to the fixed- exchange-rate philosophy has hindered the Optica group in the prior task of presenting the full case for the parallel-currency approach to European monetary unification.1


A European Parallel Currency and/or Exchange-Rate Unification?

According to the Optica group, the exchange-rate system in the European Economic Community (EEC) should, for the time being, remain flexible to some extent but "evolve with the process of monetary unification to attain fixity in a final state."2 In this final state, "the member countries could still decide whether or not they wished to introduce a single common currency."3 The group hopes to attain "the benefits . . . of a fixed exchange-rate system or, in its extreme formulation, of a single European currency . . . through progressive harmonisa

____________________
Note: The author thanks Harmen Lehment and Jürgen Roth for helpful comments on the first draft.
3
Ibid., p. 25.
1
See Roland Vaubel, "The Parallel-Currency Approach to European Monetary Unification and the Search for a New European Unit of Account," prepared for the Commission of the European Communities study group, Unité Monétaire Européenne ( Brussels, 1976), pp. 15-66; and Vaubel, Strategies for Currency Unification: The Economics of Currency Competition and the Case for a European Parallel Currency, Kieler Studien, 156 ( Tübingen: J. C. B. Mohr, 1978).
2
Study Group on Optimum Currency Areas (Optica Group), Towards Economic Equilibrium and Monetary Unification in Europe (1975 Report) ( Brussels: Commission of the EC, 1976), p. 40.

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