philipp m hildebrand : inside europe, outside emu - lessons and outlook speech by dr philipp m hildebrand, member of the governing board of the swiss national bank, at the british swiss chamber of commerce, geneva, 23 april 2004. * * * my long - standing personal attachments to the united kingdom make it a special privilege to be here this morning to speak about europe and its significance to our two countries. geneva is one of europe ’ s truly international cities and provides a fitting platform for a discussion on some of the salient characteristics about the relations of the united kingdom and switzerland toward europe. the united kingdom and switzerland are both undeniably european nations. nonetheless, they both firmly remain outside of the european monetary union ( emu ). institutionally, the links of the two countries with europe differ, of course. the united kingdom is in eu europe while switzerland is only in europe, despite the fact that until the eu welcomes ten new member states next week, we swiss can be forgiven to think of ourselves as representing the “ heart ” of europe. culturally, our two countries are rooted in different european traditions : anglo - saxon on the one hand and continental european on the other hand, notwithstanding the fact the historical roots of the saxons are, of course, on the continent. during the remainder of my time with you today, i will sketch more fully a number of salient common features and differences between the united kingdom and switzerland. based on these commonalities and differences, i will then draw some tentative economic, financial and political conclusions about the respective experiences and relations of our two countries with europe and more specifically with emu. uk and switzerland : common features and differences : it seems to me that even a perfunctory comparison of our two countries ’ relations to europe and emu needs to touch upon law, politics and recent economic history. law and politics there is a fundamental judicial divide between the common law tradition of anglo - saxon countries and the civil law tradition of continental europe. over the centuries, this divide has undoubtedly spread into culture and minds. the custom and case - based common law was institutionalized in 1154 by henry ii through elevating local custom to a unified system of law “ common ” to the country. it may be unwritten, as it was at the outset, or captured in statutes and codes. this judicial history is reflected by the absence of a written constitution in the united kingdom. civil law in continental europe, on the

no means the only relevant one. switzerland and the united kingdom are both nations with long - standing traditions of global integration and free trade. both nations rely fundamentally on multilateral contractual frameworks such as the one offered by the world trade organization ( wto ). our nations and our peoples live in and benefit from a global and open world. europe is and must remain part of that world. surely an open multilateral global economy must be our primary long - term commitment. the decision to join a regional agreement such as the european monetary union must be evaluated against this global backdrop. i have tried to provide you with a brief sketch of some of the salient macro - economic issues related to such an evaluation. beyond economics, both of our nations have a proud political history. ultimately, the decision to surrender national sovereignty - be it monetary or otherwise - will always be a political one. central bankers may have views as private citizens which they would presumably express at the ballot box. in the public domain, however, their responsibility should be to illustrate potential economic consequences of the ultimately political decision to join or not to join the european monetary union. conclusion ladies and gentlemen, the decision formally to join emu does not appear to be a policy issue of imminent concern in either of our two countries. in the united kingdom, the issue was indefinitely pushed back in time in june of last year. here in switzerland, it is the ratification of the second package of bilateral treaties with the european union that dominates our current external political agenda. since this contractual arrangement with our european partners was designed from the outset as a multi - issue legal document with costs and benefits spread over multiple issues, the swiss government is to be commended for insisting on negotiating the agreement as a comprehensive package and not break it down into multiple single issues. meanwhile, globalization is set to proceed. with the rapid integration of china and india into the global economy and the subsequent reorganization of production processes, global competition is rapidly increasing with changes in relative prices that become increasingly a function of global demand and supply. needless to say, the globalization path will neither be linear nor smooth. there are risks, perhaps none less so than the temptation of governments to resort to protectionism in a misguided effort to respond to the costs associated with global economic integration. in europe, integration is also proceeding. in less than a week, ten countries will join the european union. they will add twenty - five percent to europe ’ s population, twenty - three percent to europe ’ s