well - known british pattern of stop - go, boom - bust. gordon brown ’ s first budget had a moderating effect on the exuberant cyclical conditions. right now, the first signs of a cyclical slowdown are showing up. hopefully, they do not portend a bust for the british economy. but we will have to wait and see. like the business cycles of countries such as the netherlands and germany, that of britain will never run exactly parallel to the european average. this is the consequence of conducting a single monetary policy in an area as large as the euro zone. the differences among the countries will have to be addressed through their budgets, within the confines of the stability pact, and especially by flexible labour and product markets. in these respects, the uk is streets ahead of the other major eu countries, and is therefore well placed for emu. conclusion ladies and gentlemen, i have come to the end of my speech. all things considered, the prospects are good for the uk making a successful entry into emu somewhere in the first few years of the 21st century. the british government ’ s commitment to membership of emu, and their refusal to adopt a wait - and - see attitude can be regarded advantageous. in the meantime, the british should have a say in matters. they are a full - fledged member of the eu, and have been in on the process towards emu throughout. outsiders should not become outcasts. from the dutch perspective in particular, it is desirable that the uk should put its mark on the shape of the european economy and emu, also during the run - up to its participation. britain can play an important role in boosting the flexibility of the european labour and product markets. such a role is needed to stimulate the european economy, and to offer europe ’ s 18 million unemployed the prospect of a new job. to quote helmut kohl : “ to cooperate as closely as possible with britain ‘ in building europe ’, europe needs the united kingdom, and vice versa. the european union needs, above all, that unique british blend of realism and traditionalism, pragmatism and idealism, level - headedness and love of freedom ”. with which i could not agree more. * * * nb this bis review is available on the bis world wide web site ( http : / / www. bis. org ). _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

referendum and, for another, the uk still needs to meet the exchange rate criterion for joining the monetary union. let us take a closer look at these obstacles. first of all, the british government will have to convince the people of the importance of membership. this will be possible if the advantages are presented in a convincing way, since the idea of joining monetary union is no longer an unfamiliar one. but the exchange rate criterion, which applies for countries in search of emu membership, is another, more complex and more formal, matter. countries wishing to join emu on 1 january 1999 are required to have taken part in the exchange rate mechanism of the european monetary system for the last two years, without the fluctuation margins being exceeded. countries joining at a later stage are basically subject to the same rules. but the exchange rate mechanism which will take effect as from 1 january 1999 differs from that currently in force. in my opinion, erm2 will replace erm1. but legally, it is not that simple, and my view is not shared by everyone. for the time being, the uk is not making any moves to join the new exchange rate mechanism. i understand the uk ’ s reluctance to join erm2, considering its unfortunate experience with erm1. although the uk only joined erm1 in 1990, it was already forced to leave in 1992. naturally they feel that the experience does not bear repetition. but the circumstances prevailing at that time, viz. an excessively high entry rate for sterling and, more importantly, a macroeconomic policy which did not fully support the exchange rate objective, are in no way comparable to those in evidence in the uk and europe today. - 3now let us take a look at britain ’ s cyclical conditions and economic policy. the exchange rate movements of sterling largely reflect the cyclical divergences between the uk and the european continents. i already noted, it is crucial to british participation in emu that, in the longer term, its economic development does not diverge substantially from those in europe. the uk ’ s economy has always been subject to greater turbulence, and its business cycle is invariably ahead of those on the mainland. but the cyclical outliers seem to be decreasing. it is gratifying to note that the political stop - go cycle of interest rate policy has made way for a monetary policy aimed at keeping inflation under control. the government ’ s economic policy is now also directed at putting a stop to the