Guy Quaden: Recent developments in the Belgian economy
Speech delivered by Mr Guy Quaden, Governor of the National Bank of Belgium, on the occasion of
the celebration of the National Bank of Belgium's 150th anniversary, Brussels, on 12 May 2000.
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Your Royal Highnesses, Ladies and Gentlemen, dear friends,
I should like to begin by telling you how delighted and proud I am, as are the other members of the
Board of Directors and the Council of Regency of our Bank.
First, I am delighted to see so many friends of the National Bank of Belgium coming to Brussels this
afternoon to celebrate the 150th anniversary of our institution with us. Friends who have come from
Belgium, elsewhere in Europe, the rest of the world; from the world of public and private finance, but
also from the political, economic, social and academic world.
Allow me to express my special thanks to my colleagues and friends, the governors of the various
groups to which the National Bank of Belgium belong: the European System of Central Banks, the
G10, the Belgian Constituency at the International Monetary Fund. All are present or represented here.
The world of central banks is exceptional because of its position at the boundary between the State and
the markets, between action and deliberation, and between tradition and modernity, but it is also
exceptional in the fellowship which prevails there. I am glad to be a part of that.
Next I would like to tell you how proud I am, how proud we are, of two things. First, we are proud to
be the guardians of a long and illustrious history, the history of an institution which, as the Prime
Minister reminded us in his speech and as the video we have just seen also showed, has made a
positive and substantial contribution not only to the economic and financial history of Belgium, but
also to European unification and international monetary cooperation.
In particular, I would like to pay tribute to the three people who have preceded me at the head of our
institution, whom we are delighted to have here with us this afternoon: Cécil de Strycker, Jean
Godeaux, Alfons Verplaetse.
In the second place, we are proud that, right from the start, the National Bank of Belgium has become
a member of the European System of Central Banks and more specifically the Eurosystem, which, in
managing the new common European currency, links the European Central Bank and the eleven
national central banks which are currently members. This represents the realisation of a great political
and economic dream, and the National Bank of Belgium is proud to have contributed to it, both in
planning the arrangements at European level and in ensuring that our country satisfied the conditions
for membership. It was vital that Belgium should meet the convergence criteria: the fact that it
succeeded is, of course, due primarily to the effort made by its people, but also to the pursuit of an
appropriate economic, fiscal and monetary policy in which the central bank lent its assistance together
with the political authorities. We have also been successful in preparing with the sectors concerned for
the introducion of cashless transactions in euros.
There has been a marked strengthening of economic growth in the euro area in general, and in
Belgium in particular, over the past year. Business and consumer confidence has now reached record
levels. Of course, the euro cannot take all the credit for this welcome change of climate. The
international environment has also improved. But the introduction of the euro has contributed to this
revival of growth by giving the area a stable internal environment, by irrevocably fixing the mutual
parities of eleven currencies, damping down inflation and curbing budget deficits. And the fact that
growth is strong, confidence buoyant and inflation low, also proves to my mind that the monetary
policy of the new Eurosystem has not been inadapted.
The appreciable gain in stability brought about by the euro was particularly evident in Belgium. You
will recall that in the middle of last year our country was the victim of a localised or asymmetric
economic shock: the dioxin crisis. As I have already said, it is thanks to the euro that the
macroeconomic cost of that crisis was very small. Without the introduction of the single currency, it is
highly probable that the exchange rate of the Belgian franc and the level of interest rates in our country
would have come under pressure. The consequences of that crisis would have extended far beyond the
boundaries of the sectors directly concerned.
Here in Belgium, our motto is: strength in unity. At the National Bank of Belgium, we are certainly
not nostalgic for a monetary sovereignty which in any case had become largely illusory for highly
integrated small and medium-sized economies. The switch to a single monetary policy, decided by the
Governing Council of the European Central Bank, did not mean any loss of monetary power for
Belgium: on the contrary, since the Government and the Bank had decided ten years ago to peg the
Belgian franc to the most stable European currency, Belgium was in reality already importing its
monetary policy from Frankfurt. The difference is that, today, our monetary policy continues to be
decided in that same city, but around a different table at which there is at least one Belgian. Moreover,
the implementation of monetary policy is decentralised. And being closer to their respective national
territories, the affiliated central banks retain an inimitable role in their contact with the financial
players, and in communicating with the general public.
In the Eurosystem, which is not modelled on any other existing central bank, the principle of
subsidiarity prevails; that is a principle to which we, and I imagine our other partners, too, are deeply
attached. It means that the European Central Bank has to be allocated all the resources which it needs
for the proper performance of the tasks entrusted to it, but that the national authorities retain
competence over the tasks not assigned to it.
One would distort the character of the monetary union if one tried to force a move towards
centralisation contrary to the provisions of the Treaty and one would thus deprive the monetary union
of its democratic legitimacy. True, like any man-made edifice which aims to last, monetary union is
bound to evolve. But if we want this edifice to remain legitimate, any proposed changes must be set
out in totally clear terms, and on each occasion we shall need to check that the citizens approve of
those changes.
Studying the national and international economic environment, issuing banknotes and coins, including
in our case printing banknotes, and controlling and sometimes actually developing reliable and
efficient payment systems are three activities closely linked with monetary policy, activities which the
National Bank of Belgium developed long ago and which we intend to continue to pursue in
cooperation with our partners in the Eurosystem.
Moreover, modern central banks are rarely just central banks. They are also enterprises providing
services for public authorities, the financial world and the national economy as a whole. However, the
National Bank of Belgium stands out from many of its colleagues in the diversity of the public service
functions which the legislative body has entrusted to it for various reasons, notably the Bank's
acknowledged expertise. In passing, I would say that in view of this diverse range of activities, certain
hastily drawn comparisons concerning the number of staff used by each central bank are inapt.
The National Bank of Belgium acts as the State Cashier. In its Central Balance Sheet and Credit
Offices it gathers and processes information on enterprises and individuals, and its statistical tasks
expanded considerably in connection with the modernisation of the Belgian statistical system,
launched in 1994; in particular, since that time the Bank has been responsible in particular for the
foreign trade statistics and for compiling the national accounts.
Two key features are characteristic of the recent evolution of many central banks including our own:
the banks have to contend with increased pressure of competition and they enjoy greater
independence. These changes require us to modify our behaviour.
Most of our activities, be they connected with monetary policy or other functions in the public interest,
are naturally affected nowadays by the establishment of monetary union, but also by the spread of new
technologies and the concentration taking place in the financial sector. Having long been sheltered
from competition, the central banks, too, are now inhabiting a more competitive environment. While
they still hold a monopoly on the issue of banknotes, notes are less and less predominant as means of
payment. Also, membership of the Eurosystem is naturally encouraging a process of benchmarking
and emulation among the various member central banks.
The ethos of an enterprise such as ours has centred on optimum quality of service. This is an aspect of
excellence which we must, of course, preserve. But at the same time, greater attention is required to
the cost effectiveness of our service. The concern about our production costs is nothing new, but it has
increased.
Under the Maastricht Treaty, the countries of Europe also opted for the model of a European central
bank alongside national central banks with a large degree of independence. According to this idea,
once the central bankers have been appointed by the political authority - because, fortunately, they do
not coopt themselves - they act to the best of their knowledge and belief, without seeking or accepting
any instructions, in taking the decisions which they consider most appropriate for attaining the
objectives assigned to them by the Treaty on European Union and the national laws.
Most people believe that such a system ensures the optimum credibility and effectiveness for monetary
policy, in particular making it possible to keep interest rates relatively low. But this greater autonomy
also entails greater obligations for us: we are aware of these and I shall pay particular attention to
them. First, there is the obligation to be more conscientious than ever about ensuring objectivity and
total impartiality in our analyses, decisions and recommendations. Then there is the obligation to
render regular and clear account for our actions, to be unflagging in explaining our actions and, if
possible, winning support, because the ultimate foundation of the independence of a central bank is
not a law, nor even a treaty, but the acceptance by the people concerned of the policy being
implemented.
With this in mind, I think it was among others wise to keep the Bank's Council of Regency in
existence, even if it has finally lost all monetary power. It offers an irreplaceable opportunity for
dialogue between the directors of the central bank and the experts representing the main spheres of
Belgian society.
The Bank's board of directors have duties towards the population; they also have duties towards the
staff of the Bank. The standards expected of the Bank and its staff are traditionally high and have been
accentuated by the profound changes which I have already mentioned. We need to adapt our
organisation without being over-hasty but also without dragging our feet, because anticipating
probable developments is the best way of controlling them.
Our staff, thanks to whom the switch to monetary union, in particular, was successfully accomplished,
work hard and efficiently, and we still expect a great deal of them in meeting the challenges ahead and
fulfilling our ambitions. But we must also be able to define for our staff - and this must be done in
collaboration with our partners in the European Central Bank and the Eurosystem - clear prospects for
the foreseeable future, without which, we know, enthusiasm could give way to bitterness.
My colleagues on the Board of Directors and I myself have held a strategic reflection aimed at
increasing the quality of the Bank's response to today's challenges, and especially the challenges of
tomorrow. That reflection will shortly be extended, by degrees, to include all our staff. I have no doubt
that they will enrich the discussion and that together we shall be able to realise the objective of a bank
that is ever better equipped to meet the expectations of Belgian society, and to maintain its position in
the concert of Europe and in international cooperation.
We shall probably need to specialise more, perhaps giving up certain activities; we shall undoubtedly
need to adjust the scale of others, but we shall also have to develop our action in fields whose
importance is increasing. I will give two examples.
The National Bank of Belgium like all central banks, has since long shown an interest in the security
and stability of the financial system. But due to its integration in the European System of Central
Banks, the Bank has been given an explicit responsibility in this field and the Belgian law has recently
entrusted the Bank with the surveillance (or "oversight") of payment systems and securities clearing
systems.
To prevent excessive debts the Government has also decided in principle to set up a "positive" credit
centre, responsible for registering all credits taken out by households preventing default on payments.
The competence which it demonstrated in managing the Negative Centre, responsible for registering
cases of default only, and the commercial neutrality which typifies the National Bank it, seem to
render her very well-suited for that function.
Ladies and Gentlemen, the National Bank of Belgium is 150 years old. I cannot tell you what will
have become of it in 50 years' time, in 2050. But I will venture to tell you what it aims to be in 5
years' time, in 2005.
In 2005 the euro will have been in circulation for three years in Belgium and in ten other European
countries in the form of coins and notes, some of which will have been printed by the National Bank
of Belgium's printing department. The National Bank will continue to ensure the quality of the notes
and coins in circulation. There will be less branches but the Bank will maintain its presence in each
Belgian province. The National Bank of Belgium will be a faithful, active and appreciated partner in
the Eurosystem. The Bank will also have maintained the quality and relevance of its research and
sometimes increased its originality. In its service activities, the Bank will endeavour to offer the best
in terms of value for money; it may develop some of its activities with similarly reliable partners.
External and internal communication will have been stepped up. The corporate ethos, centred on the
pursuit of excellence, will encourage creativity and initiative more than it does today. In our various
areas of activity, the National Bank will be able to recruit the best people. The entire population will
regard it as an independent, competent and accessible public interest institution which provides real
added value for Belgium's economy and society.
Ladies and Gentlemen, we are proud of the Bank's history and ambitious for its future.