The future of monetary arrangements in Europe

Quarterly Bulletin 1989 Q3
Published on 01 September 1989

The Governor discusses a number of possible approaches to economic and monetary union in Europe in the light of the economic factors that will determine its feasibility and desirability. He concludes that an activist strategy that sought to force the pace on monetary union ahead of progress on economic integration would be liable to create unacceptable regional strains, and argues the advantages of an evolutionary approach.

The Governor goes on to examine the question of UK membership of the Exchange Rate Mechanism, noting the potential benefits but stressing that membership would not be without strain, nor obviate the need for disciplined policy actions. On the timing of entry, he again warns of the risks of seeking to force the pace by early entry while such significant differences in demand conditions and inflation performance between the United Kingdom and its Community partners persist.

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