mr. duisenberg discusses the comparisons between the structures and methods of the european system of central banks and the us federal reserve system address held by the president of the netherlands bank and of the bank for international settlements, dr. w. f. duisenberg, at the spring meeting of the institute of international finance in washington on 29 / 4 / 97. 1. only twenty months to go before emu takes off ; before then, in the summer of 1998 at the latest, the escb will be established. the preparations for this turning - point in the history of europe are in full swing. next year it will be decided which member states are to be in from the outset, a decision to be taken as you know by the heads of government on the basis of the measure of sustained convergence achieved. although the stability - oriented tradition which has grown up over the years is to be continued within emu, there will be a fundamental change in the way monetary policy will be determined centrally. here questions arise, such as : how will the centre, i. e. the ecb, and the existing national central banks relate to each other in such a context, and how can the skills and expertise of those national central banks best be used, without impairing the single nature of monetary policy? it is these questions that i would like to focus on today. as the escb will have a federal structure comparable to that of the federal reserve system, it may be useful to take a look at the experience of the united states, all the more so as the underlying economies will be comparable in size. in particular, what lessons can europe learn from this experience? 2. let me emphasize a few points at the outset. on its own, monetary policy is not equipped to counter an unfavourable macro - economic development. that calls for the concerted employment of all available macro - economic policy instruments. in the american situation, the fed is expected to operate within the framework of the general economic objectives set by the administration. coordination is facilitated by the centralized formulation of monetary policy. in a monetary union such as the united states and the future emu, policy can only be pursued centrally. it is indivisible by its very nature, for one thing because of its official interest rates, subjecting all regions making up the union to uniform financial conditions. as to the question how monetary policy can best be conducted, there is no unequivocal answer. that question relates to issues

support for its actions. this is a task for the national central banks, whose historical ties to their own peoples are deeply rooted. in this respect it should also be kept in mind that the fed ’ s accountability to congress has no equivalent in europe. although the president of the escb is expected to appear periodically before the european parliament, the latter does not have the same powers as the us congress, which can in principle amend the federal reserve act. furthermore, any discussion of the european policy mix will be different in nature because budgetary policy will remain the province of the european member states. this policy will, however, be subject to the limitations set out in the stability pact recently agreed by the member states, which as you know aims to foster sustained sound public finances in europe. 8. what i have just said about the need to develop a “ european ” perspective has implications for monetary and economic analysis. the centre will need to have at its disposal considerable analytical machinery in order to be able to perform this pioneering role successfully. as a system of european statistics and analysis cannot be set up overnight, no time should be lost. indeed, the preparations being made at the emi in this area are proceeding at full steam. of course, these new statistics will take getting used to. but, at the same time, some things will remain unchanged. national analyses will continue to play an important role so long as europe has not been transformed into a single economy. after all, if we wish to understand what is happening at the european level, we would be well advised also to look at the underlying national economic relationships. with respect to these analytical tasks, the division of labour between the centre and the national central banks is likely to evolve of its own accord. at first glance, this division seems likely to reflect that the national central banks know their own economies best. 9. contrary to the us situation, the implementation of monetary policy in europe will not take place at one location away from the centre but, where possible and appropriate, decentrally. that has to do with the fact that europe ’ s central banks and financial markets have a rich and extensive history. a decentral approach makes allowance for differences in european practices and market conditions. in this context it should be noted that the formulation chosen for decentralization in europe in principle allows for the ecb to play a role in policy implementation. there is no knowing in advance how the tasks will be divided among the national central banks themselves, and between them and