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• PASTOR GENERAL'S REPORT, AUGUST 6, 1986
PAGE 15
resulting tensions. That may be true, but it does not follow that
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the system is ideal, or that it is not possible to find a better
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which would help to ensure that fewer imbalances and tensions
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�elop in the future••••
��It is appropriate to examine the regional example of the EMS not
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because it is perfect in its nature or workings, but because: 1)
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It is a model upon which to improve and to adapt to the needs of a
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.,h global system; and 2) A strengthened EMS will be an essential
� ingredient in an improved international system•••• The purpose of
�/ the [EMS] system is to establish a zone of monetary stability in
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Europe, with monetary stability implying stability of prices as
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well as of exchange rates. For this reason, the system has moved
the price performance of its other members closer to that of [the
most stable member] the Federal Republic of Germany•••• It would
be wrong to portray this as the other members abandoning their
monetary sovereignty to the German central bank. The decisions
are being made in common••••
The system is evolutionary•••• The formal incorporation of the EMS
and the ECU in the Treaty of Rome is another important step on the
evolutionary path that has been followed since the system was
established in 1979.
The leaders of the E.C. decided last
December to include the following in a new article in the Treaty
of Rome:
"In order to ensure the convergence of economic and
monetary policies which is necessary for the further development
of the Community, member states•••shall take account of the
experience acquired in cooperation within the framework of the
European Monetary System and in developing the ECU, shall respect
existing powers in this field." •••
It is also noteworthy that the•••use of the ECU is no longer
confined to the Community•••• In the third quarter of 1985, there
were two Asian borrowers in the market, and other non-E.C.
countries included:
Cameroon, where the national airline
refinanced a previous dollar-denominated loan; the Soviet Union,
where Vneshtorgbank, following other similar operations, confirmed
its interest toward the European currency; finally, multiple
option loans have been granted to borrowers from Rumania, Sweden
and New Zealand•••• Creating a more stable international monetary
s t stem will be facilitated b � these developments within the EMS.
T e improved global system will rest on the three main currenc *
blocks associated with the dollar, the en and the ECU, and eac
o those b ocks wi 1 have to be so id or a cooperative global
system to develop smoothly.
In the long run, there may be very close cooperation between the yen
and ECU blocs, especially if the dollar is negatively impacted through
protectionist measures and/or the Third World debt problem. While I
was in Japan this past May for the Tokyo summit, two of Japan's four
English-language dailies presented special reports on the increasing
cooperation between
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Japan and the European Community
(Common
arket) •••• Jacques Delor, president of the European Commission,
recently remarked that the U.S. can no longer be expected to serve as