The euro has enjoyed "indisputable success" by bringing Europe's major economies closer together and hastening structural reform, said Bank of France governor Jean-Claude Trichet on Monday, Novmber 27.
Trichet, who is scheduled to take over as head of the European Central Bank when Dutchman Wim Duisenberg steps down, said in a speech in Tokyo that it was too soon to write the ailing currency off.
"From a technical and operational point of view, the launch of the euro on financial markets has been an indisputable success," he said at a forum organised by Europlace, a lobby group pushing Paris as a financial centre.
The euro's success could be measured in various ways, Trichet said, citing its role as a benchmark guide to comparative performances by the 11 member economies.
Moreover, "it was a mistake not to understand that we had a concept of convergence towards the best behavior" of low inflation and long-term economic stability.
"The single currency is per se a structural reform of extreme magnitude," the French central banker added.
"I trust that the fact that we have a single currency will help us to make progress in the direction of a more productive European economy."
The euro's launch in January last year had also helped the merger and acquisition market for European companies expand "at a fantastic speed," Trichet said.
The European M and A market was worth one trillion euro ($840 billion) last year, and Europe's Target system for cross-border financial settlements was handling four million transactions every month.
"This is emblematic of what we are doing: a very, very large market."
Foreign direct investment, whose US-bound direction out of Europe has contributed to the euro's slump against the dollar since its launch, was beginning to reverse.
"The general sentiment is that we are in the process of steady growth in Europe for this year and next," Trichet said.
The ECB stood ready to use instruments at its disposal, including market intervention, to defend its currency, the next central bank president added.
"Interventions are acts, they are not words, and to me they speak by themselves," Trichet said, adding: "I trust that we will continue to have a very nice, fruitful and very efficient cooperation with our friends in the United States."
On monetary policy, the governor said: "Our own duty is to utilize the instruments that are in our own hands. But that has to be balanced with all other economic policies.
"I trust that credibility is the major instrument we have. If everybody is convinced, which is the case today, that we are vigilant and credible in being vigilant, it means that anticipations will help us."
Trichet tackled critics who charge that the euro cannot compete with the dollar unless Europe has a central budgetary policy in line with that of the United States.
"We have a peer surveillance of national budget policies. It is usually underestimated that it goes very far," he said.
In other federal systems, "it is not possible for the centre to tell the states that their budgetary policy is not correct."
Trichet added the ECB would remain vigilant to ensure high oil prices do not translate into higher inflation.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
