European payment system(s) in perspective: a Central Banker's view

Tommaso Padoa-Schioppa



I. INTRODUCTION

1. Three weeks ago, on 29 May, the TARGET Report was released by the European Monetary Institute, a key step in the preparation of the transition to the third stage of Monetary Union. The Report outlines the main features of the system that the EU central banks intend to implement to handle interbank large­value cross­border transfers. It will serve the needs of the single monetary policy.

The TARGET Report can be seen as an outcome of the cooperation among EU central banks that began four years ago with the creation of the Ad Hoc Working Group on EC Payment Systems. Its publication closes the first phase of this cooperation, which was aimed at identifying the direction to be followed by central banks in developing common initiatives in the field of payment systems. At the same time it opens a second phase, which will focus on the implementation of the projects approved. It was with these considerations in mind that I entitled my presentation: "European Payment System(s) in Perspective".

In this presentation I shall summarise the work done by European central banks in the field of payment systems and outline the process that has led to the present design of TARGET. I will conclude with some reflections on the transition to a single currency. Before doing so, however, I would like to briefly recall the special role played by central banks within payment systems and the link between that role and the other institutional functions of central banks.


II. PAYMENT SYSTEMS AND CENTRAL BANKING

2. The origin of modern central banks lies in a fundamental change in payment technology: the change from a commodity currency to a fiduciary money. In all systems based on fiduciary money payments between two parties are carried out by transferring the liability of a third party. And, since by definition fiduciary money has no intrinsic value, the value of that liability, and hence its acceptance as a means of payment, depends on the credit standing of the issuer. After some experience with unregulated private systems of issue, it was recognised that, to make money universally acceptable, the ultimate issuer had to be an outside institution, a "central" bank, designed to perform a public function.

3. Over time, this institutional setting was adapted to take account of the growing role of commercial banks in providing payment instruments and services. For central banks, the widespread use of commercial bank deposits as means of payment had two main consequences.

First, central banks started to supply commercial banks with payment services similar to those provided by commercial banks to households and businesses. The liabilities of the central bank ­ which is the only possible third party to all banks, being external to the banking system as a whole, hence the expression "outside money" ­­ were demanded by banks to settle their mutual transactions. Central bank money, in fact, is the only means that ensures the finality of payments, fully extinguishes obligations and eliminates risk. Through the supply of outside money the central bank determines its price and thus short­term interest rates: this is the principal channel through which monetary policy impulses are transmitted to the economy.

The second consequence for central banks of the rise of commercial banking was that they came to be progressively entrusted with the function of supervising banks. The use of commercial bank deposits as means of payment was based on public's confidence that they could always be converted into legal tender. The soundness of the banking system thus became a prerequisite for the stability of the payment system. Since central banks do not compete with banks, know their operations, and are in a position to provide liquidity to the system, they have been entrusted in most countries with the function of bank supervisors.

These short remarks suffice to show that the two major activities of modern central banks, namely the conduct of monetary policy and banking supervision, are strictly related to a third, the unique role they play in the payment system. The fixity of the parity between one unit of "inside" money and one unit of "outside" money is the cornerstone of the monetary system, the element linking the three functions of modern central banks.

4. This triadic configuration was fully developed in the thirties, when the transition from commodity to fiat money was completed. It still represents the necessary reference framework for analysing central banks' activities. While the monetary policy function became progressively the core of central banking, the question whether it was appropriate to make the central bank responsible for banking supervision remained open. The controversial nature of this issue is reflected in the Statute of the ESCB, which combines responsibility for the soundness of the payment system with the management of monetary policy but does not entrust the ESCB with the primary role in banking supervision. A thorough discussion of this issue would lead me far from our today's theme and take too much time. I shall therefore focus on the linkages between payment systems and monetary policy.


III. CURRENT TRENDS IN PAYMENT SYSTEMS

5. Traditionally, interbank payments have been processed in three different modes: (i) bilateral netting with settlement in commercial bank money; (ii) multilateral netting with settlement in central bank money; and (iii) bilateral settlement in central bank money on a gross basis.

The first mode, which is based on the correspondent accounts that commercial banks open with each other, is typically used today for cross­border payments, but it is also used at a domestic level where access to payment systems is restricted to specific categories of intermediaries or tiering arrangements are adopted. Correspondent accounts are designed so as to reap the advantages of bilateral netting to the largest extent compatible with the level of risk that banks are willing to accept vis­à­vis one another. Hence, correspondent banks settle their balances in central bank money only when these exceed the credit lines they have been granted.

Correspondent arrangements have four main drawbacks concerning competition, conflicts of interest, risks and their impact on the conduct of monetary policy. Competition is affected inasmuch as small banks depend on large ones for the settlement of their payments. Conflicts of interest may arise because the larger banks act both as commercial banks and as providers of clearing and settlement services, thereby supplying their competitors with the means of exchange they need. Risks stem from the limited use made of central bank money, the only settlement means that ensures finality. For the same reason, in a payment system based on correspondent banking the responsiveness of the monetary system to the impulses transmitted by the central bank is limited.

6. The second mode, multilateral netting with settlement in central bank money, has long been the most common one for processing interbank payments in industrialised countries. The reason why net settlement systems came to play a predominant role is that they provide end­of­day finality, while allowing reserves to be economised. Although the amount of central bank money required to settle at the end of the day is minimised through netting, the central bank is able to exercise prompt control over the liquidity conditions of the system, and systemic stability is enhanced by the irrevocability of the closing of the netting procedure. For each participating bank, however, the finality of the payments received depends on the successful conclusion of the netting cycle and, hence, on all the other participants' ability to settle their balances.

In net settlement systems risk is therefore of a systemic nature, since the failure of just one participant could trigger a domino effect and lead to the collapse of the entire system. Now, over the last fifteen years, due to financial integration and technological innovation, the total amount of gross transactions to be settled has grown so dramatically in relation both to banks' reserves at the central bank and to their capital, that the potential effects of a crisis have assumed catastrophic proportions. Central banks can prevent a systemic crisis from erupting by providing extra liquidity, but if they always did so, and if the system knew that they were ready to do so, central bank money would cease to be exogenously determined and monetary control would be lost.

7. The third mode for processing interbank payments, the settlement of individual transactions on the accounts held by banks at the central bank, has the advantage of ensuring the immediate finality of each and every payment. For the system as a whole this is a great advantage in terms of reliability and safety. Until recently, gross settlement involved the high, indeed the unacceptable cost of holding very large amounts of non­interest­bearing reserves at the central bank. Technological innovation has now changed the situation and made large­scale use of gross settlement possible by dramatically increasing the velocity of central bank money. As velocity cannot be relied upon as the only instrument to provide banks with the reserves needed to settle payments on a gross basis, central banks must be ready to supply intraday liquidity.

The use of gross settlement improves the effectiveness of monetary policy for two main reasons related to safety and efficiency. First, by reducing risk, gross settlement frees the conduct of monetary policy from concern about the stability of payment systems; second, by involving the use of central bank money throughout the day, it tightens the hold of the central bank on the monetary system. The transition towards real-time gross settlement systems for large-value interbank payments is the key development of the present period in our field.


IV. TOWARDS AN EU­WIDE PAYMENT SYSTEM

8. With this framework in mind, let me briefly review the path which led the Working Group from its creation, four years ago, to the publication of the TARGET Report. When the Group was set up in January 1991, to study the problems posed by the completion of the Single Market and the prospect of Monetary Union (the latter was in the background, because the drafting of what a year later became the Maastricht Treaty had just begun), one could certainly not speak of a European payment system. In fact, the payment systems of the EC countries were characterised ­­ to an even greater extent than those of the other industrialised countries ­­ by a variety of legal and regulatory frameworks, operational and technical standards, currencies and central banks. The common features were at a bare minimum: the provision of settlement accounts by the central banks and the restriction of access to net settlement systems to selected intermediaries.

9. Yet, there were already strong pressures at work to integrate payment systems. These were generated by the high level of integration of real economies, and even more by the recent liberalisation of capital movements and the imminent implementation of the single market for banking and financial services. Efficient cross­border payment services are a major requirement for the former, and an important part of the latter. The prospect of Monetary Union was by no means a primary factor. Rather, it could be considered as the last step of the integration process and as a solution to some of the problems it raised.

10. One might ask whether the integration of the payment systems could not be left to market forces alone, without central banks taking part in the process. To an advocate of minimal government intervention in economic life such as I am, this is an appealing prospect. Yet, I think the answer to the question is a clear "No". In every country, the smooth functioning of the payment system requires a carefully balanced blend of three forces: competition, cooperation and "public action". The same is true at the EU level. Deprived of the protection national barriers had traditionally provided, European banks and financial institutions started to compete fiercely in the newly established European­wide market. While seeking to offer their customers more efficient payment services, banks realised that competition alone could not integrate the system and enlarge the market. One of the first results of the cooperative efforts that began to complement competition in payment services was the creation of the ECU Clearing System.

11. The third key element needed to ensure the working of a payment system ­­ namely, public action ­­ was still completely lacking at EU level at the beginning of 1991. It was nonetheless indispensable if some of the problems raised by the nature of the integration process were to be tackled. These problems could be described as follows:

(i) the unrestricted access to payment systems granted to banks by the Second EC Directive confronted central banks with the problem of coordinating their oversight functions, in order to prevent regulatory arbitrage from undermining the stability and integrity of their respective systems;

(ii) the wide differences between domestic payment systems meant that such systems could not be linked without providing additional liquidity and creating credit risk. In fact, linking heterogeneous systems could make them all vulnerable to the problems arising in the others;

(iii) the prospect of Monetary Union raised the completely new issue of creating a single payment system for Stage III. It was indeed hard to imagine the implementation of the ESCB not being accompanied by the creation of a European system for large­value payments that would be as fast and sound as the most efficient domestic payment systems.

12. The "public action" required to deal with the problems posed by the implementation of the single market and the prospect of monetary union can thus be a combination of three elements: cooperative oversight, harmonisation of some features of domestic payment systems and the implementation of a European­wide payment system designed to serve the needs of the single monetary policy. These were the three objectives that the EU central banks agreed to pursue in the so called "Main Report" presented by the Working Group in May 1992. The first objective required a definition of the oversight function ­­ with particular regard to its links with the other tasks traditionally performed by central banks ­­ as well as closer coordination among overseers. It therefore fell exclusively within the competence of central banks and banking supervisors. The other two objectives, implying a direct operational role by central banks, affected the structure of the domestic payment systems and consequently also involved individual commercial banks and the banking community as a whole.

13. Awareness of this led the Group to maintain a dialogue with commercial banks and their associations from the very beginning of its activity. Every important step in the Group's work has been accompanied by a discussion from which both sides have benefited. In four years of cooperation, and despite their different roles and responsibilities, the Working Group and the representatives of European commercial banks have developed a common language and a mutual trust that has produced, I think, very fruitful results.

14. Cooperation among EU central banks was facilitated by coinciding with the start of a new debate on the reform of domestic payment systems. The risks and the externalities associated with multilateral netting systems were leading central banks to rethink the structure of their systems and to reassess their own roles. The need that all central banks shared to clarify their views in face of new technological developments and to design an appropriate strategy turned the WGPS into a privileged forum for common analysis and debate.

15. The first issue to be dealt with, as a follow up to the Main Report, concerned the harmonisation of domestic payment systems, with a view to enhancing their soundness and promoting their integration, the Group agreed upon ten principles which were to serve as guidelines to EC central banks. These principles, contained in the Report "Minimum Common Features for Domestic Payment Systems" of November 1993, covered the six areas identified in the Main Report as requiring harmonisation: access conditions, risk management policies, legal issues, standards and infrastructures, pricing policies and business hours.

16. The key feature of the emerging "European model", however, was the shift to gross settlement, a model, I should say, that also characterizes the evolution of payment systems in the near non­European countries. Four years ago, only four EU countries had a gross settlement system and only in Denmark did it process all large­value payments. Today, all but two EU countries are planning to have real­time gross settlement systems in operation by the end of 1996, and they are expected to handle most large­value payments. The movement to gross settlement does not imply the complete substitution of netting systems. Although some European central banks envisage that the establishment of the gross settlement system will result in netting systems ceasing to process large­value payments, the 1993 Report suggested that gross and net settlement systems could co­exist, provided the latter complied with the minimum standards laid down in 1990 by the so called Lamfalussy Report.

The EU central banks must now define the operational features of their gross settlement systems with a view to achieving the optimal balance between efficiency and stability.

The debate on the features of domestic payment systems is strictly related to that on the configuration of the system to be implemented for Stage III. I shall now concentrate my attention on this issue.


V. THE TARGET SYSTEM

17. In shaping the features of the payment system for Stage III, EU central banks had to take account of potentially conflicting constraints concerning the operational aspects of the system and the timetable of its implementation. Let me briefly explain.

First, there was the problem of reconciling the drive towards decentralisation, stemming from the principle of subsidiarity in the ESCB Statute, and the need to maintain a unitary stance in the conduct of monetary policy. Second, it was necessary to reconcile the relatively short time horizon set by the Treaty with the long lead time required by the development of a project as complex as the creation of a single payment system. In fact, art. 109f (3) of the Treaty states that "at the latest by 31 December 1996, the EMI must specify the regulatory, organisational and logistic framework necessary for the ESCB to perform its tasks in the third stage". This deadline required central banks to design the TARGET project in a very short time. Third, given the uncertainty regarding both the actual timetable of Monetary Union and the countries that would participate, the Working Group was careful not to invest more resources than was considered consistent with the state of affairs at the time of its activity.

18. Various solutions were considered to reconcile these conflicts. One consisted in "non intervention". This would have meant leaving EU cross­border payments to be processed only through the correspondent accounts banks held on a bilateral basis, a solution that would hardly have granted the same level of efficiency and stability as a domestic payment system, as required for the future European system. Furthermore, this arrangement would have failed to ensure a unitary monetary stance throughout the Union. In fact, funds transferred through arbitrage transactions across countries (i.e., between different money markets) would not be represented by central bank money, but by deposits held with large correspondent banks.

19. A better­grounded alternative would have been to create a new centralised netting system. This solution ­­ which might appear to be in line with the historical evolution of domestic payment systems ­­ was not retained for three main reasons. Firstly, it would have entailed an excessive centralisation of the payment system. This would have been in conflict both with the Treaty and with the structure of the European financial system, in which several financial centres co­exist and compete. The location of the clearing house in one centre would probably have led to the centralisation of the interbank market and an undue advantage for the centre chosen. Secondly, the decision to establish a central clearing house would not have been consistent with the intention of EU central banks to increase the use of gross settlement in their domestic payment systems. Thirdly, a "European" netting system was already in operation: I refer to the ECU Clearing System, which represented a major achievement of the cooperation among commercial banks and which is likely to play an important role in Stage III as the main EU­wide private payment arrangement.

20. A third route was therefore chosen. In line with the shift to gross settlement in domestic payment systems, the Working Group proposed, and the EMI Council decided, that the system for Stage III would be obtained by linking the domestic real­time gross settlement systems. With a view to complying with the approach of the Treaty and taking account of both technical and operational constraints, the TARGET project has been structured around three principles: decentralisation, market freedom and what was labelled "minimum approach". Let me briefly explain.

21. Decentralisation means that the most important infrastructures of TARGET will be those established in the Member States for the development and modernization of their respective domestic systems. Indeed, the bulk of TARGET will comprise the domestic gross settlement systems. A set of common procedures and infrastructures will be added to connect them, the "Interlinking system". Payments will be processed by the domestic gross settlement systems and exchanged, after settlement, between the national central banks.

22. The market principle, which, as you know, is enshrined in Article 102a of the Treaty, means that the involvement of EU central banks should be restricted to the functions which cannot be adequately performed by the private sector. Accordingly, the use of TARGET will not be mandatory, except for payments directly related to the implementation of monetary policy. Other payments may also be processed through the system, but the alternative routes offered by correspondent banking and net settlement systems will remain open to traffic. Of course, it is to be expected that within the European Union TARGET will eventually play the same role ­­ and therefore process an equivalent volume of payments ­­ as gross settlement systems in each domestic payment system.

23. By "minimum approach" I mean that EU central banks have sought to design TARGET so as to minimise the time and costs involved in establishing the new system, while equipping it with all the operational devices needed to perform its functions. Accordingly, harmonisation of the features of the domestic gross settlement systems will be adopted only to avoid competitive distortions within the banking system and to ensure the effective conduct of monetary policy. Let me briefly comment on this latter aspect.

24. The TARGET project is mainly designed to serve the needs of the single monetary policy in Stage III. Within a decentralised system, set up to fit the policentric nature of the European financial system, the support that the payment system is required to provide to monetary policy consists in allowing arbitrage whenever the price for central bank money differs across financial centres. In order to ensure a unitary monetary policy stance, the linking of domestic interbank markets seems a better and more efficient route than the creation ex novo of a centralised market.

The TARGET system will support arbitrage operations, in an efficient way, by linking the settlement accounts held by banks at their respective central banks. This will have two major beneficial consequences.

First, assuming that all banks have access to central bank money on an intraday basis, it is reasonable to expect that there will always be sufficient liquidity to carry out arbitrage operations, regardless of the problems which the domestic payment systems may encounter.

Second, by participating in the domestic gross settlement systems and holding settlement accounts at central banks, medium­ and small­sized banks will also have easier access to the European­wide interbank market, thereby increasing its breadth and liquidity. This would be much harder to achieve in a centralised system, which would probably be organised around a two­tier structure, with only the largest banks participating directly.

25. TARGET will play a key role in supporting the conduct of the single monetary policy. By widening the use of gross settlement, it will enhance the soundness of the payment systems within the European Union. Furthermore, it will represent both a benchmark and a catalyst for the unification process. The implementation of TARGET certainly does not represent the conclusion of the process, however. Proof that an EU­wide payment system has finally been realised will come when national borders lose all significance for the transfer of funds: only when a payment between Brussels and Manchester is as efficient, secure, and quick as a payment between Brussels and Liege, will the unification process be complete and the payment systems of the European countries turn into the European payment system.


VI. THE PROVISION OF LIQUIDITY

26. The TARGET Report identifies three aspects of domestic gross settlement systems requiring a degree of harmonisation: operating hours, pricing policies and, last but first in importance, the provision of intraday liquidity. Harmonisation of operating hours and pricing policies were deemed to be necessary to ensure the smooth functioning of the EU­wide money market in Stage III and to avoid undue competition among central banks, but they had no immediate impact on the development of the TARGET project. Harmonisation in these two fields did not involve significant engineering problems. However, harmonisation in the third area, the provision of intraday liquidity, turned out to be a much more serious problem. Let me briefly examine why.

27. As I said earlier, technological innovation has made real­time gross settlement in central bank money economically viable by increasing the velocity of circulation of reserves held at the central banks. However, on its own this higher velocity of circulation does not ensure the smooth working of the system with an unchanged amount of central bank money. In order to enhance the use of gross settlement and to make it not costly for banks, additional liquidity (i.e. on top of the amount that would be needed to operate the same payments through the traditional netting procedures) has to be provided intraday.

28. There is, to be true, an alternative solution, which consists in setting up a queuing mechanism. This is, however, tantamount to diluting the finality of the payment process, as queued payments are not final by definition. EU central banks have decided against queuing as the solution, and have agreed to consider it only as a "buffer", so that queuing has a merely residual role. The mechanism for providing intraday liquidity thus has become a central issue for the Working Group.

29. Intraday liquidity can be provided in a variety of ways: (i) by mobilising compulsory reserves; (ii) by enabling banks to overdraw (with adequate collateral being posted) their settlement accounts; and (iii) by carrying out intraday repos. I shall not dwell on the technicalities of these three approaches, nor shall I explain the problems, advantages and drawbacks of each of them. Rather, I would like to refer to two broader aspects of the work done by the Group in connection with the issue of intraday liquidity. They concern its relationship with monetary policy and the mode of harmonisation. Let me take them in turn.

30. Intraday liquidity facilities are generally thought not to have implications for monetary control, provided the intraday credit does not "spill overnight" and the pattern of payments during the day does not influence monetary policy decisions. Whether these conditions are met depends on the behaviour of both commercial and central banks. However, the provision of intraday liquidity is not irrelevant, since it strengthens the operational link between the functioning of payment systems and the conduct of monetary policy. This is not surprising because the instruments and the "raw material" used for the two purposes are the same in a gross settlement system. Indeed, central banks provide intraday liquidity through the same instruments as they use for monetary policy purposes. Moreover, central bank money functions both as a lubricant for the payment system during the business day and as a precautionary reserve at the end of it. These links require payment system arrangements and monetary policy operations to be mutually consistent, thereby attributing "policy relevance" to the technical choices made in designing the payment system for Stage III.

31. The second aspect concerns the mode of harmonisation. This aspect is linked to the previous one because the interdependence between technical and policy issues could eventually slow the development of the project. It is so because the debate over the monetary policy instruments to be used in Stage III did not ­­ nor needed to ­­ reach a firm conclusion within the tight time constraints required by the engineers for the implementation of the system. The solution agreed to overcome this difficulty was that of "buying" flexibility. This means EU central banks have decided that their gross settlement systems should, as much as possible, be compatible with a variety of technical devices for the injection of intraday liquidity included in an agreed "menu of solutions". At a later stage, the best instrument would be chosen among the solutions contained in the "menu". Since all the parties concerned cooperated, the adoption of the "menu" curbed the cost of creating a flexible system down.


VII. THE CHANGEOVER TO THE SINGLE CURRENCY

32. TARGET has been designed as the payment system for Stage III of Monetary Union, in which the foreign exchange market for national currencies ceases to exist as a result of locking the parities. It is now accepted that day one of Stage III will not be the day on which national currencies are instantaneously replaced by the single currency in a sort of a "big bang". Awareness of this has opened a debate, within both the central banks and the banking communities, over the most efficient way to change over to the single currency. The EU Commission has recently made a useful contribution to this debate with its Green Paper, which envisages a gradual approach to the changeover, with an initial step based on the adoption of the ECU in both monetary policy operations and money market transactions.

33. The design and organisation of the changeover is a very complex exercise, covering a broad spectrum of issues ranging from a "cold" engineering end, to a "hot" end in which psychological and monetary policy issues are involved. Payment system experts stand close to the engineering end of the spectrum. From this position they can contribute to the debate by clarifying the technical implications and viability of the different strategies for introducing the single currency. Let me just submit some broad reflections on the changeover process:

(i) once the "big­bang" hypothesis is dropped, different approaches to the changeover are technically feasible; they are characterised ­­ to a greater or lesser extent ­­ by "duality", i.e. the co­existence of the single currency and domestic denominations;

(ii) all the approaches require technical devices to handle "duality". Such devices range from conversion mechanisms between domestic denominations and the ECU to the parallel processing of the single currency and national denominations through different systems or within the same system;

(iii) dual (or even multicurrency) operations should not be confused with dual accounting. The former is normal practice for many banks, the latter would require very costly investments. The devices mentioned above should make it possible to confine "duality" to the operational sphere without affecting the accounting one;

(iv) different technical devices to handle operational duality may have different costs for banks, hence they affect the latter's competitiveness with respect to other intermediaries, and, in the longer run, the structure of the market for payment services itself.

34. The structure of the banking system and, more generally, of the financial system is another aspect that cannot be ignored and it varies from country to country. Thus, the problems encountered by a banking industry consisting almost entirely of a few large international banks that already extensively conduct a large volume of multicurrency operations may be quite different from those of a highly fragmented system in which small monocurrency banks represent a substantial component of the total. The optimal path may not be the same for both.

35. Taking all these elements into account could lead central banks to agree upon a set of "key points" to ensure the overall consistency of the changeover process throughout the European Union, while leaving the other aspects of the process to the discretion of individual countries. These key points could cover such aspects as the duration of the changeover process, the date of its conclusion, the denomination to be used in monetary policy operations, technical standards and some intermediate steps. Within this general workplan, each country would organise the changeover in the way best suited to its banking structure.


VIII. CONCLUSION

36. Let me conclude with some reflections on three issues I have dealt with in my presentation.

Central banking and payment systems. For many decades, since the technology of paper currency and bank deposits had shaped the payment systems, central banks had almost ceased to see how much their functions in monetary policy and banking supervision derive from their role within the payment system as the ultimate issuers of means of payment. Under the pressure of technological innovation and financial integration, they have rediscovered how important management of the payment system is. For European central banks another factor has played: the choice and the will to create a single financial market and, ultimately, a monetary union. As happened one hundred years ago, "public action" in the field of payment systems was not imposed from the top. Rather, the need for it gradually emerged from the market, as a means of tackling the problems raised by the process of relevant change.

Public action in payment systems. A specific feature of central banks, especially in relation to payment systems, is that the functions they perform tie them in closely with the counterparty to which their action is directed, the banking system. This means that central banks and commercial banks form a unified whole. Neither commercial banks through market forces nor the central bank through institutional guidance can create an efficient and sound payment system. This calls for close cooperation.

The changeover. The transition to the single currency is a process that will require the three forces of market initiative, cooperation and public action to interact actively. Its success will largely depend on the way this interaction develops. In turn, designing the division of labour between these three forces is one of the essential tasks of the public authorities involved in the overall EMU process: the European Monetary Institute, the EU Commission and Council, and national Governments. The coming months will be crucial in this respect.

20-06-1995


Deputy Director General of the Bank of Italy. Speech at the EFMA Conference in Brussels, 19-20 June 1995.


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