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The European Monetary System (December 6, 1978)

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One can best illustrate the negative results of the drifting apart of European currencies by looking at statistics and observing how – since currency instability became particularly pronounced around 1973/74 – intra-Community economic trade has lagged relative to foreign trade outside the Community. Whereas from 1957 to 1973 intra-Community economic trade always grew faster than worldwide economic trade – as expressed by the advancing integration process of the Common Market – in the last three to four years intra-Community trade has lagged behind it world trade. This is an expression of a quantitatively significant disintegration resulting from currency differences.

If this [development] were allowed to continue for another three, four, five, or more years, I fear that it would destroy more than just the common agricultural market. That has already been destroyed by the divergence of currencies. It does not exist in reality. There is no single price for a liter of milk or a pound of butter in two European countries. At least not for the consumer; a single price exists only for the accountants. The agricultural market has already fallen apart. Agricultural exchange in Europe is more difficult today than it was fifty years ago. At that time, one only had to pay customs duties. Today one has to make incredible calculations in order to know what to ask for a pound of butter.

In addition to the disintegration of the agricultural market, the Common Market would be threatened as well. In some cases, economic policy discipline could also decrease because members of the Common Market would favor their own currencies – or to be more precise: their own balance of payments – so that within the Common Market the gap between stable and less stable national economies could continue to grow.

The decisions reached yesterday evening had been in the making for six months and were made possible by a growing consciousness of the importance of maintaining monetary stability among the member countries. If, for example, one compares the inflation rates of the European member countries in 1973 and 1974 with the inflation rates that have been reached in all these neighboring and partner countries today, it is apparent that the abatement of inflation, while still insufficient in many cases, must nevertheless be seen as an important success in reversing the perception not only of the governments in those countries, but also of their parliaments, public opinion, associations, corporations, trade unions.

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