[PEN-L:2694] Re: Re: Re. euro-query

[Trevor Evans <Trevor_Evans@xxxxxxxxxxxxxx>]

I think that Barkley's examples differ from the situation regarding the
euro. Notes issued by US banks in the nineteenth century exchanged at
varying discounts because there was no central bank that integrated the
monetary system. In the case of the euro, the European System of Central
Banks stands ready to convert all currency issued by member states at the
official rate.

Before answering Jim Devine's important question about thinking the
impossible - what could lead to the break up of the european monetary
system -  I wanted to consult with some comrades here who I meet with in a
discussion group every couple of weeks.

The first response was to ask, what could lead to the collapse of the US
monetary system.

The next suggestion was a revolution in France. Unfortunately this doesn't
look very likely in the near future.

A last response was that, if the European Central Bank pursued a highly
restrictive monetary policy, some countries might chose to opt out of the
system - something for which there is no provision, but would  be difficult
to prevent if a government was really determined. But even then, unless it
were Germany or France, its not clear that this would threaten the euro;
and its also very difficult to envisage realistic conditions under which a
member country would wish to do so, given the increasing  degree of
integration of the economies, and also that the euro is an attempt to
reduce countries vulnerability to external financial crisis.

As I have already said, in my opion, the time when the system of exchage
rates was potentially at risk was between last summer, when the decision
was taken  to adopt the central EMS rates as the basis for the euro
conversion rates, and the end of the year, when the rates were fixed
irrevocably. Now that the rates are fixed, euro-zone countries have ensured
themselves against exchange-rate instability within the zone.

Trevor Evans
Paul Lincke Ufer 44
10999 Berlin

Tel. & fax: +49 30 612 3951
Email: Trevor_Evans@xxxxxxxxxxxxxx