Déclaration de M. Laurent Fabius, ministre de l'économie des finances et de l'industrie, sur l'Union économique et monétaire, son rôle comme moteur du développement de l'Europe et comment l'Asie peut en tirer des leçons pour développer sa coopération régi
Date: 2001-11-06
Orateur: Laurent Fabius
Fonction: FRANCE. Ministre de l'économie, des finances et de l'industrie

Mr. Chairman, let me start by thanking you warmly for offering me two opportunities. First, to be able to make, on my way back from Beijing to Paris, a short halt in Shanghaï, which has played for a long time a key role as a cultural and financial bridge between China and the western civilisation. Second, to address such a distinguished audience, representative of the dynamics of entrepreneurship and finance in China and in Asia, especially in Shanghai stock exchange which will play a major financial role in the future. Today, I would like to share with you the ambition embodied by the European single currency and to draw with you some lessons from the European monetary union which might be of some relevance for the younger but fast-growing East-Asian monetary cooperation. In order to clarify the issues at stake, I shall answer two questions : - What does the Euro mean for us and how will it work? - How could Asia benefit from lessons learned from the European monetary integration to develop its regional cooperation? What does the Euro mean for us and how will it work ? What is the Economic and Monetary Union built on ? The EU has for long been more than a customs union or a common market. Following the signature of the Treaty founding the European Community and of those that followed - the last of which was agreed in Nice in December 2000 - it has become a genuine Economic and Monetary Union. Today this Economic and Monetary Union does exist, and it does function. It can be an example for other areas in the world, as discussions with our Asian partners have evidenced repeatedly. It has demonstrated its effectiveness as an economic power, as a nexus of stability and as a major player in the economic and financial relationships. Seen from outside, the functioning of a single currency area, with 12 sovereign Member States, out of the 15 members of the EU, may raise legitimate questions. Let me remind you the key features of policy co-ordination in the Euro area. We, European countries, are acting more and more together in the economic field. Whereas there is a single monetary policy, most other policies, including fiscal and tax policies, are still chiefly decided at a national level and thus demand an European co-ordination. This co-ordination is ensured by the Finance Ministers of the Euro area either within what we call the Ecofin (15 Ministers) for passing community legislation in the economic and financial fields, or within the Eurogroup (12 Ministers) for monitoring the currency and economic developments, discuss fiscal policies, structural reforms and issues directly related to the single currency such as the introduction to Euro notes and coins. The Eurogroup maintains a permanent dialogue with the European Central Bank (ECB) which defines and implements in full independence the monetary policy of the Euro area with the view to ensure price stability. In interacting constantly together, the Eurogroup and ECB must prove their ability to maintain the appropriate policy-mix in the Euro area. This dialogue includes exchange rate issues. The dialogue between Ministers and the ECB regarding the external value of the Euro should make it possible for the Euro area to speak with one single voice. For instance, the interventions performed by the ECB and other G7 central banks in september 2000 highlighted this coordination and have contributed to engineer the pickup of the Euro. In what ways does the Euro strengthen the economic power of Europe ? As trade integration deepens, the costs of exchange rate volatility are growing and are threatening its benefits in terms of growth and economic stability. The build-up of the single currency should thus be seen, not only as the expression of a political will but also, more simply, as a pragmatic response to this very concrete economic problem. - Euro already reflects the large share of Europe in global trade flows. A single currency offsets by definition the costs of foreign exchange fluctuations between member states' currencies. But it also cushions the costs of fluctuations between the Euro and the other major currencies in so far as a growing share of our external trade is billed in Euro. The importance of the Euro as a global currency shows the pre-eminent role of the Euro area in global trade. As the largest trade area in the world, Euroland accounts for 15 % of world exports. Roughly speaking, between 2/3 and 3/4 of the external trade of the Euro area is denominated in Euro. The trade strength of the area acts as a magnet on the countries which have the closest trade links with the area. In United Kingdom for instance, which is not (yet) a member of the Euro area, nearly 30 % of international trade transactions are already carried out in Euro. Major British exporters, especially (but not only) foreign affiliates, increasingly require from their counterparts to bill them in euro. On the commodity market, many developments are indicating that some important goods exporters could gradually diversify their currency exposition by billing part of their exports in Euro. - Euro already won a key position as a reserve currency. The Euro already gained a top position in the bond market. From a quantitative perspective, the euro bond market has reached in two years a leading position and presents the same liquidity as the US market : - it was already the case for the sovereign and agencies debt ; - it is now the case for private sector issuance which has increased from 150 billions Euros in 1997 to around 420 billions Euros in 2000. Even in terms of the stock of debt issued, the euro and dollar markets have roughly the same size ; - besides, 65 % of the stock of debt of the Euro area is now denominated in Euro. But, and it is perhaps even more important, the perception of the eurobond-market is improving day after day. The Euro-denominated bond market and especially the French OAT-market has been ahead both in its technical performance and in its ability to meet the sophisticated needs of demanding international investors. After the introduction of bonds indexed on the French inflation rate, France-Trésor, our debt management Agency, launched last month the first bonds to be indexed on the inflation rate of the euro area, enabling thus international investors to hedge their inflation risk in the Euro area. The emergence of an efficient Government debt market denominated in Euro is contributing to the rapid development of a corporate bond market. Since the introduction of the single currency, corporate issuance amounted to more than 230 billions euros, a figure roughly comparable to the issuance volume in dollar. The Euro-denominated bond market is a high-grade market (95 % of the total amount issued is A-rated or more). On the supply side, it is also one of the most diversified and it is one of the most internationalised as well : in the corporate segment alone, Euro area-resident issuers account only for slightly more than 50 %. I note with satisfaction that the Chinese government already seized the opportunities offered by the Euro by issuing last May for the first time in euros. I hope the very favorable conditions they benefited from this first sovereign issuance will encourage other Chinese borrowers to consider Euro-denominated issuances. The emergence of a major currency offers real diversification opportunities for official reserve managers. Two-third of official reserves around the world are still denominated in dollar. The Euro represents an important diversification opportunity. Euro-denominated reserves already account for 12.5 % of global official reserves and this " market share " has considerable prospect of expansion. One must bear in mind that it is now the currency of more than 300 millions people with a high purchasing power and that the changeover on January 1st 2002 to a "real" currency in the pockets of these 300 millions people will be a powerful asset and incentive. The diversification of official foreign exchange reserves is contributing to rebalancing the international monetary system. This diversification is especially important for the largest reserve-holders, and China is ranking high in this field. By the lack of diversification vehicles, they were facing up to now an important currency and yield risk. Now they can mitigate this risk an efficient way and increase safely the average return of their currency portfolios. How will Euro become a tangible reality in the wallet of every citizen of the twelve member-states ? Within less than 60 days, the Euro will be the only account unit in 12 participating countries. Until now, Euro was somewhat "theoritecal". The introduction of euro notes and coins is a tremendous challenge, probably unprecedented in history. In six weeks, we will substitute nearly 16 billion notes representing 686 billions Euro throughout the Euro area. In France only, 20 000 tons of coins will be distributed at the beginning of 2002, representing four times the weight of the Eiffel Tower. Up to now, the Euro has remained a rather abstract notion for most European citizens. It will then become a tangible reality. Before that, by the end of this year, all non cash operations of customers and corporations will proceed in euro. This change involves all the components of our society, and it will increase the public awareness of the benefits involved. Every month, I discuss with my Eurogroup colleagues the progress of the preparatory work for the introduction of notes and coins. We are confident that this introduction will be performed smoothly. We built security plans. All these developments show that a monetary union is a efficient way to promote growth between integrated economies. The ASEAN+3 countries are not as different from the European Union countries as people tend to think and would probably benefit from tightening their links. I will now try to elaborate on how Asia could benefit from the lessons learned from the European monetary integration. First, a strenghthening of monetary cooperation in East Asia would present several advantages for China and its neighbours. It appeared during the Asian crisis that nominal pegs on the USD were not appropriate for most countries. They led to the severe depreciation of several currencies when foreign exchange reserves were almost completely depleted. Since then, except for China and Malaysia, Asian countries have shifted their currency exchange regimes to managed floats. Theoretically these new regimes present important advantages, allowing for more flexibility in monetary policy, especially in the management of foreign reserves. However, experience shows this is not the case when the economies are highly integrated and the cooperation between monetary authorities is weak or inadequate. For example, in the present economic slowdown, many countries could be tempted to let their currencies depreciate, helping order to preserve their external account surpluses, but such a strategy would be ineffective to deal with a demand shock, like the one East Asian economies have cope with. A greater cooperation would help to avoid this unnecessary depreciation, which is reducing the profit margins, increasing the external debt services, and fragilizing domestic banking sectors. A greater cooperation between the regional monetary authorities would indeed help to reduce all of these side effects. It would reduce bilateral exchange rate volatility in the region and enhance investors' visibility in the medium term, which would be a positive factor towards attracting more foreign investment. Peer pressure would make governments less reluctant to depreciate or appreciate their currencies when regional fundamentals are advocating for it, and would avoid either an under or overshooting of the required adjustment. While these thoughts may seem far-fetched for China, I know the Chinese authorities have already understood the importance of this cooperation, for example by keeping the yuan stable during the Asian crisis, helping to stop a round of competitive devaluations, and later by taking an active part in the Chiang Mai initiative and the building of a regional network of bilateral swap arrangements. Indeed, China so far has seemed unaffected by the deterioration of its competitive advantage. However, the access of China to the WTO at the end of this week, which is a major step both for China and for the world, will increase competitive pressures on the domestic and external markets. This require in a few years time a shift towards a more flexible currency regime, towards which Chinese authorities are already publicly heading. At that time, China will, like all other countries, probably benefit from a regional arrangement which it will have contributed to create from here and now, given the current regional importance of the yuan. I would like to stress that the terms of the debate about economic and financial integration in Asia and in Europe are not so different as many people tend to think. The initial conditions in economic terms are actually rather close. East Asia already demonstrates a high degree of trade and financial integration. During the last days, a project about an Asian Free Trade Zone has been largely discussed. Intra-zone trade in ASEAN+3 countries as a share of GDP is at the same level in the ASEAN as it was in the European community in 1995 (about 10 %). Moreover, most of the goods (about 80 %) traded internally are manufactured products whose prices are more dependent on bilateral exchange rates levels than commodities and would thus benefit more from a regional agreement. Moreover, in spite of historical tensions, China and Japan are going to be more and more interdependent, especially thanks to the entry of China into the WTO. The two largest economies will probably deepen their economic integration and identify more and more common interests: while China will provide low cost manufacturing and will become a favorite place for Japanese companies outsourcing, Japan consumers will more and more benefit from cheap Chinese manufactured goods. However, we have to concede there are still major differences between Europe and Asia, mainly because monetary integration needs to go hand in hand with a rapid convergence between economies and some form of political integration, which is not yet on the agenda in East Asia. East Asian economies are still very diverse, and cover a wide range of development levels, from newly industrialized economies such as South Korea and Singapore to very poor countries, as Cambodia or Lao PDR. China, Indonesia and the Philippines stand in the middle. In Europe, the convergence between the richest (France, Germany) and the poorest (Greece, Portugal, Ireland) countries of the EU have been accelerated by a powerful instrument, the "structural funds". Managed by the European commission, they have financed large scale infrastructures projects in these countries, stimulating thier growth and modernizing their structures. While multilateral development banks, i.e. the World Bank and the Asian Development Bank are partly fulfilling this role, they are not substitutes for real regional mutual aid structures. Informal networks created by the private sector and the Diaspora are so far prominent and thus very important, as they are other ways to facilitate economic integration. Their existence emphasizes the need for regional free trade and for fostering cross-border investment. In this context, increasing the flexibility of economic policies seems essential to me. Both the monetary and fiscal policy will have to become more efficient. Regarding monetary policy, the financial crisis has shown that some Asian financial sectors were undercapitalized and too highly indebted due to inefficient investment in the real estate sector especially. Most economies were highly vulnerable to an increase in the interest rate, which hampered the room of maneuver for monetary policy. The success of financial and corporate sector restructuring is thus all the more important for Asia, and the present crisis highlights the need to go further in this process. Regarding fiscal policy , monetary policy convergence implies that the fiscal policy be fully operational to ease the consequences of economic shocks. Most countries have proven inefficient at protecting the poorest people from the crisis because of inadequate social safety nets. China's reform towards creating a real social protection scheme is most welcome and has already inspired other. A precise targeting of these social safety nets will prove to be the most effective way to implement fiscal stimulus. Last but not least, strengthening the surveillance role of international organizations would be a real help. A regional cooperation system would not be complete without a crisis prevention framework supported by the IMF. As an example, a more systematic approach from a regional point of view during macroeconomic reviews, as it is done in unified monetary zones should be fostered. But these practical considerations will not be a replacement for a strong political will for unification. One can not foster economic integration if there is no political common will. This aspect, given the historical and political background of Asian countries, is certainly the most difficult issue. Indeed, if Asian countries are willing to pursue their integration, they are to adopt a coordinated and proactive forward-looking approach. In that case, they should be ready to accept the sharing of sovereignty due to a coordinated monetary policy. This is crucial to build an increased dialogue between Asian countries. To develop this common understanding, networks between financial authorities are to be encouraged. This increased dialogue could take place through the ASEAN+3 process and the Chiang Mai initiative, but is also important in multilateral instances, like the ASEM or APEC processes, which are to play a critical role into defining an "Asian" approach to globalization. Mr. Chairman, the European monetary integration is well advanced and has been supporting growth in Europe. Asian countries meet most of the conditions required for pushing forward their integration. With time, the potential benefits to be created by this cooperation will become clearer and could outweigh the initial hesitations of many countries. European economic cooperation has started a long time ago and we cannot expect Asia to move much faster than us, but the high degree of adaptability of the Asian economies will be a very positive factor in this process. I am very confident in the future of Asian integration and I think China and especially Shanghai will play a major part. (Source http://www.minefi.gouv.fr, le 15 novembre 2001)