CITY AND SUBURBAN
Bringing down the Euro-bank's commandments from the paper mountain
CH RISTOPHER FILDES
The new central bank of Europe this week inaugurated its headquarters build- ing, which occupies the greater part of the land surface of Luxembourg. The first President of the Governors of the Reserve Banking System of the European Com- munity, M. Aristide Harpagon (Belgium), confirmed that its cost would now be met by a one per cent levy on all banking transactions. Speaking at the opening cere- mony, M. Harpagon proclaimed that the 32-storey building stood as a visible rebuke to such doubters as Prime Minister Thatch- er, who as recently as 1988 was saying that such a bank would be an entrenchment on national sovereignty. The governors at their meeting rejected, by 11 votes to 1, a request for transitional status for the UK domestic unit (formerly the pound sterl- ing), agreeing that now that Britafn had accepted the obligations of European Monetary System membership, it must accept the consequences, whatever adjust- ment they might entail. The Governor for the Netherlands raised the question of the paper mountain — gigantic stocks of cur- rency units (chiefly Portuguese and Greek) acquired by the bank as a consequence of its intervention programme. The cost of financing this surplus had now driven the Euro-bank-rate up to 23 per cent. M. Harpagon announced proposals to make some of these stocks available to Libya, on favourable terms, to finance that country's programme of defence procurement from Community suppliers. The Governor for France blamed the intransigence and myopia of the Governor for West Ger- many, who blamed the craft and subservi- ence of the Governor for France. The Governor for Italy, as agent, reported on the rescue of the Banco Palermitano Camorristo, which had advertised for de- posits throughout the single European market, and now showed a deficit amount- ing to trillions of Italian units (or billions of Ecus) apparently used to finance consign- ments of pharmaceutical products and Olive oil. The Governor for Ireland asked Whether the creditors could be refinanced from the stockpile. The secretariat re- ported on directives to standardise the pins used in letters of credit, adopt a uniform headgear for bill-brokers, phase out local units, enforce a common interest rate and abolish the aberrant British practice of overdrafts. The Governor for the UK said that he had never seen a cart placed more squarely before a horse which was facing in the wrong direction. He hoped to see the national economies of Europe converge, and financial convergence could be ex- pected to follow, but to try to achieve that by imposing a central bank was like trying to impose a common temperature across Europe by jamming all the thermometers. Now, if his colleagues would excuse him, he had work to do at the Threadneedle Street branch, and besides, Kent were batting at Maidstone and his bees were swarming. The remaining Governors con- sidered a proposal to expel him, but decided that a more appropriate punish- ment was to force him to remain a mem- ber.
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