mr. george weighs up the pros and cons of european monetary union speech given by the governor of the bank of england, mr. e. a. j. george, at the bankers club annual banquet held in london on 3 / 2 / 97. i ’ ve been a follower of jim wolfensohn for the past 20 years, and it is a great pleasure to follow him again this evening. i first came across him when he was an extraordinary investment banker reputedly flying the world with his cello strapped securely in the adjacent seat. his eventual appointment to the presidency of the world bank was inspired. he brings to it an outstanding professionalism. but - as you have heard this evening - he brings to it also a broad humanitarian vision and total commitment to the world bank ’ s task of improving the lives of people in those parts of the world that still need outside official help with their reconstruction and development. president wolfensohn ’ s canvas tonight has been global. my own focus will be on europe, and in particular on european monetary union - though it ’ s fair to say that emu could well have significant consequences for the global economy. this country is widely regarded elsewhere in europe as being bloody - minded and even obstructive about monetary union, largely because there is indeed an intense, and often impassioned, debate going on here about the pros and cons. and so there should be. it ’ s a momentous enterprise, with potentially enormous implications for europe ’ s political and economic future. the simple fact is that there are real risks as well as real potential benefits in monetary union ; and it would be foolhardy just to assume that the enterprise, if it is embarked upon, will inevitably bring about the political harmony and economic prosperity across europe that anyone in their right mind wants to see. it is hugely important to all of us that europe ’ s political leaders stand back and weigh the risks as well as the potential benefits, dispassionately, before any irrevocable step is taken. if the debate in this country encourages open debate elsewhere then we will be doing a service to europe as a whole. it is something of a fashion these days to describe economic conditions in terms of fairy stories. i have heard the steady expansion in the united states, and more recently in this country, described as the “ goldilocks ” condition - with the economic temperature not too hot, not too cold, but just right. in the

this would be “ a good thing ”. that i have to say is not our experience. in practice unnecessary or ineffective domestic regulations or restrictions have often been the cause of financial activity growing up elsewhere. in any event we live in a global financial world and the euro is bound to become a widely - used and actively - traded currency internationally. its liquidity is likely to be a key attraction to domestic and foreign users alike. the city of london both contributes to, and thrives upon, liquid markets, and the euro - market, or the euro - euro - market if we are an “ out ”, will be no exception. that can only be good for the development of financial activity - the provision of competitive financial services - across europe as a whole, because we are not talking here about a zero - sum game. euro - activity in london is likely to stimulate financial activity in other centres and vice versa ; and much of that activity will be undertaken by branches or affiliates of the same major financial firms. the first ecu - euro bond raised last week by a european borrower and managed from london by a swiss / british and a french bank and by another french bank in paris, is a good example not just of london ’ s international role as it is today, but of how it is likely to continue. in this area, too, therefore i see our national interests coinciding rather than conflicting with the collective european interest. that is why the bank of england, at all levels, is playing a full, active, and constructive, part in both the preparatory work of the emi, and in the technical preparation of london ’ s great financial markets. if monetary union goes ahead, with or without the uk, we have a vital interest in its success, and we will do all that we can to ensure that outcome. mr president, i am delighted to see so many bankers from around the world here again this evening - and generally looking so prosperous. and, come what may in relation to emu, i confidently look forward to seeing you all at this great banquet again next year, and for many years to come - looking just as prosperous. it is in that context that i ask you to rise and join me in a toast to the bankers club - coupled with the name of its president, sir william purves.