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Britain and European Monetary Cooperation, 1964–1979The European Approach versus Sterling-Dollar Diplomacy

Britain and European Monetary Cooperation, 1964–1979: The European Approach versus... [On 12 January 1967, before Wilson travelled to France and Belgium, Kaldor jotted down an interesting note on the subject of a European reserve currency. The background to this was a close approximation to the deadlock in Britain’s negotiations for EEC entry: the second try raised a further difficulty with the question of sterling. France played a major role in creating this difficulty: the French would ‘maintain the line that the continuance of sterling as a reserve currency is incompatible with Common Market membership’.1 In this stalemate, Kaldor argued that Britain’s entry into the EEC would stand a good chance of achieving a long-term solution to the problem of sterling by linking it as a reserve currency with the EEC’s project for a common European currency. He raised two hypotheses: ‘the creation of a purely reserve currency — a kind of European bancor — with the pooling of reserves of member countries’ and ‘a complete merger of currencies and the transfer of all assets and liabilities of individual Central Banks to a new European Central Bank’.2 The former was close to a parallel currency approach to EMU. In this approach, while member countries would deposit their own reserves with the newly created central bank and thereby acquire the European bancor against these reserves, the bancor and each individual currency would coexist and the individual national central banks would be retained.3 The bancor, like the European Currency Unit (ECU) in the EMS, would serve as an international unit of account, a reserve asset, and as a means of settlement among the central banks.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

Britain and European Monetary Cooperation, 1964–1979The European Approach versus Sterling-Dollar Diplomacy

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References (4)

Publisher
Palgrave Macmillan UK
Copyright
© The Editor(s) (if applicable) and The Author(s) 2015
ISBN
978-1-137-49141-1
Pages
137 –150
DOI
10.1057/9781137491428_8
Publisher site
See Chapter on Publisher Site

Abstract

[On 12 January 1967, before Wilson travelled to France and Belgium, Kaldor jotted down an interesting note on the subject of a European reserve currency. The background to this was a close approximation to the deadlock in Britain’s negotiations for EEC entry: the second try raised a further difficulty with the question of sterling. France played a major role in creating this difficulty: the French would ‘maintain the line that the continuance of sterling as a reserve currency is incompatible with Common Market membership’.1 In this stalemate, Kaldor argued that Britain’s entry into the EEC would stand a good chance of achieving a long-term solution to the problem of sterling by linking it as a reserve currency with the EEC’s project for a common European currency. He raised two hypotheses: ‘the creation of a purely reserve currency — a kind of European bancor — with the pooling of reserves of member countries’ and ‘a complete merger of currencies and the transfer of all assets and liabilities of individual Central Banks to a new European Central Bank’.2 The former was close to a parallel currency approach to EMU. In this approach, while member countries would deposit their own reserves with the newly created central bank and thereby acquire the European bancor against these reserves, the bancor and each individual currency would coexist and the individual national central banks would be retained.3 The bancor, like the European Currency Unit (ECU) in the EMS, would serve as an international unit of account, a reserve asset, and as a means of settlement among the central banks.]

Published: Jan 16, 2016

Keywords: Central Bank; European Central Bank; European Monetary Union; Reserve Currency; Europa Approach

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