Reviewing some of the challenges and uncertainties facing the world economy, the Governor stresses the importance of ensuring that the GATT trade talks should not be allowed to fail, and comments also on the need for fiscal restraint in Germany in the face of the dilemmas posed by the mounting costs of unification. Against the background of current difficulties, he spells out the risks of moving to monetary union in Europe before there has been a much greater degree of economic convergence and sufficient structural integration to ensure the social and political costs of union would be manageable and acceptable.
There are, however, useful ways in which further progress can be made that do not involve unnecessary risks, and the Governor goes on to argue in detail the advantages of the UK proposal for a European Monetary Fund and a Hard Ecu: in particular, it would help to familiarise the Community with the concept of a common currency; it would address the question of how transition to a single currency and a European central bank could be managed and the essential credibility acquired; and, most important of all, it would have powerful anti-inflationary characteristics, so that it could, over time, become the anchor currency.
The world economy and Europe-1991 - Governor's speech