I would like to begin this, our first meeting of 1999, by welcoming the successful launch of the euro. This is an historic event—for Europe and for the international monetary system. I would like to congratulate our European colleagues on this collective achievement. Let me share some thoughts with you from the twin perspectives of Europe and the international monetary system.
First, the launch itself has been strikingly smooth. This is testament, indeed, to the vision, professionalism, and dedication of all those involved at both the EU[European Union] and national levels. It has also been a model of cooperation and partnership between public and private sectors.
The foundation for this success has, of course, been created by the impressive strengthening of macroeconomic policies in Europe in recent years. In crafting and implementing its monetary policy, the European System of Central Banks (ESCB) will be able to capitalize on the hard-won credibility earned by its member central banks. No less important is the stability- oriented frame-work established by the Maastricht Treaty and the Stability and Growth Pact. These auger well for a euro that will command confidence.
EMU is a milestone in European economic integration and the capstone of decades of effort to establish—this time irrevocably—exchange rate stability with in continental Europe. But challenges remain to be addressed if EMU is to realize its full promise. In the fiscal area, the task of bringing budgets into balance or small surplus is not yet complete. However, it is in structural reform that the greatest strides now need to be made. Improving the working of labor and product markets, reforming public spending programs, and lightening the burden of taxation—these are the key to realizing Europe’s full potential for lasting job creation and growth.
A successful EMU holds great promise for the world economy. It can play a key role in fostering an open and stable international economic system. Moreover, it will bring a broader and deeper European capital market offering new opportunities to savers and borrowers the world over. The launch of the euro also offers new scope for global cooperation. We at the IMF look forward to playing a full part in this process—in our surveillance of euro- area policies and more generally in providing a forum in which the members of the euro-area and their international partners can work together in the interest of a well-functioning international monetary system—surely the key purpose of the IMF.
The IMF’s Executive Board noted the historic character of the event and endorsed the views expressed by the Managing Director.
SDR Valuation and Interest Rate Baskets
Following is an edited version of Press Release No. 98/64, December 22,1998.
The IMF has replaced the currency amounts of deutsche mark and French francs in the SDR valuation basket with equivalent amounts of euros, based on the fixed conversion rates between the euro and the deutsche mark and French franc announced by the European Council. The currencies of Japan, the United Kingdom, and the United States remain in the basket. Effective January 1,1999, the date of introduction of the single currency in the 11 countries initially participating in the EMU, the value of the SDR will be the sum of the values of the following amounts of each currency:
The currency amounts in the SDR basket have been rounded in line with the principles set out in the guidelines for the calculation of currency amounts in the SDR basket established by the IMF’s Executive Board. The value of the SDR in terms of currencies is the same today under both the existing (with deutsche mark and French franc) and revised (with euro) valuation baskets.
The financial instruments in the SDR interest rate basket—the market yield of three-month treasury bills for France, the United Kingdom, and the United States; the three-month interbank deposit rate for Germany;and the three-month rate on certificates of deposit in Japan—will remain unchanged, although the French and German instruments will be expressed in euros, effective January 1, 1999. The SDR interest rate is determined weekly as a weighted average of interest rates on these five instruments, with weights reflecting the values of the currency amounts shown above.
In line with the currently effective decision on the SDR valuation basket, the next revision of the SDR basket will take place not later than 2000, with any changes to take effect on January 1,2001. The SDR interest rate basket will be revised at the same time.
Further information on the SDR, its definition, valuation, interest rate, and exchange rates can be found on the IMF’s Internet website (www.imf.org) under Fund Rates.
The IMF’s Articles of Agreement extend membership solely to countries. The euro area is thus not able to appoint a Governor or appoint or elect Executive Directors to the IMF. On December 22, 1998, however, the IMF granted observer status to the ECB. Under this arrangement, the ECB will be invited to send a representative to Executive Board meetings on IMF surveillance over the common monetary and exchange rate policies of the euro area and over the policies of individual euro area members. The ECB representative will also be invited to attend Board discussions on the role of the euro in the international monetary system, the World Economic Outlook exercise, international capital markets reports, world economic and market developments, and other items recognized by the ECB and the IMF to be of mutual interest in the performance of their respective mandates.
Public Information Notices (PINs) are IMF Executive Board assessments of members’ economic prospects and policies issued—with the consent of the member—following Article IV consultations, with background on the members’ economies. Recently issued PINs include
|1998||Colombia, No. 86, December 1|
Tajikistan, No. 87, December 21
Malawi, No. 88, December 30
|1999||Panama, No. 1, January 5|
Full texts are available on the IMF’s worldwide website(www.imf.org/pins).