mr. meyer addresses the competitiveness of financial centres from a swiss perspective address by the chairman of the governing board of the swiss national bank, mr. hans meyer, at the international bankers club luxembourg, held in luxembourg on 23 / 3 / 98. both luxembourg and switzerland are major financial centres in europe. the performance and competitiveness of the financial services industry are thus of key economic and social importance to both countries. i should like to use this opportunity to say a few words on the subject from what may be a somewhat unusual perspective. the factors which determine the competitiveness of an industry are basically the same as those determining the success of the entire economy. in both cases, we are looking at a multitude of quite diverse factors with varying degrees of importance. today, i would like to single out just three of them which i believe are of particular significance : economic stability, social equilibrium ( i. e. political stability ), and the human factor. although each of these elements could be dealt with separately, they should ultimately be viewed in a broader context. let ’ s start with economic stability. i define this as a state of balanced development across the economy as a whole, characterised by steady growth, a modest inflation rate and low unemployment. one of the main prerequisites for achieving such a state is the ability not only to create but to sustain an appropriate economic framework. this is primarily an objective for monetary policy, fiscal policy and competition policy. the main goal of monetary policy is to maintain price stability. this is of course not an end in itself, but a means to an end. a non - inflationary climate facilitates the free play of market forces and keeps socially damaging developments at bay. fiscal policy must, basically, aim in the longer term to balance the public budgets. as with monetary policy, it is a question of steady, ongoing efforts. this should be no surprise, considering that the whole spectrum of public sector activities is reflected in the public budgets. this in turn raises the question of what services the state should perform, who should pay for them and how public - services can most efficiently be provided. where competition policy is concerned, the aim is to create conditions conducive to the free play of market forces. in recent decades, it has unfortunately not always been possible to gain consensus support for the idea of free competition, which is still regarded with scepticism and suspicion by many people. provided that free competition is able to develop in a stable environment, there

can be little doubt that it is the best means to assure optimal use of available resources. when things go wrong, it is generally due not to the principle of free competition itself but to the lack of a stable environment. i would like to stress once again that the task of creating a stable economic framework is a never - ending one : it is a question of constantly working towards - but never actually reaching - the intended goal. success in this endeavour is not just a question of thinking things through in a consistent way but, above all, of adopting a persevering and workmanlike approach. economic stability in the sense of a balanced development of the economy as a whole is the sine qua non for a financial centre. it is essential if investors are to gain sufficient confidence in the prospect of sustainable business success. stable prices, low interest rates, modest rates of taxation and a solid currency are the crucial factors. to what extent - if at all - is a financial centre reliant on its economic hinterland? this question is less easy to answer. although a well - balanced interdependency might seem to be desirable here as well, this is not necessarily confirmed by experience. in fact, there never seems to have been any close correlation, and with modern technology enhancing the mobility of people, goods and services, the links have become even looser. our two countries at least are proof of the fact that there need not be any close correlation between the importance of a country ’ s economy and that of its financial sector. talking about economic stability, i referred to the need for perseverance. this is precisely where i see the link with social and political stability. the central task of any community is to provide its members with the greatest possible degree of security, freedom and general welfare. the last - 2of these factors - the general welfare of the population - is dependent precisely on the creation of the appropriate economic framework i mentioned earlier. i should add that this task can only be accomplished if a sufficient number of citizens actively help in shaping developments. this is especially the case in the sphere of fiscal policy. in the wake of extremely dynamic growth, public budgets have grown considerably in all developed countries over the past few decades. while the original purpose of this spending was to meet a pressing and legitimate need such as in the area of social security - there has been a growing disparity between the claims made on the public purse and the willingness to generate the necessary resources. today