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Jean-Claude Trichet (14): Quietly making history in Toronto

     In my view, it was in Canada that Germany and France made a pivotal step toward the integration of Europe based on a common currency. That is a little-known piece of history; I have not seen this historical agreement mentioned in any article I have read.

     It occurred in 1988 on the sidelines of the G-7 summit in Toronto, held June 19-21. President Francois Mitterrand and Chancellor Helmut Kohl agreed in private that Jacques Delors, president of the European Commission, should head a committee to discuss the introduction of a single European currency.

     I had been appointed director of the French Treasury in September of 1987. This is a prominent administrative position in the Ministry of Finance, so I attended the G-7 Summit as the "financial sherpa" of the French delegation. I did not participate in the bilateral talks between President Mitterrand and Chancellor Kohl, but I learned firsthand about their agreement on the scene.

Critical decision     

The crux of their agreement was to ask central bank governors to draw up a blueprint for creating a single currency. The bank chiefs were undoubtedly the best experts on the subject. The group would be led by Mr. Delors, who was trusted by the two heads of state. Moreover, he had worked for 17 years at the French central bank. If the finance ministers had been asked to paint the picture, their own opposition to the project and inevitable clashes with the central bankers would have pushed the unification goal far back. Choosing this method proved highly effective.

     Not surprisingly, French Finance Minister Pierre Beregovoy and other finance chiefs were unhappy and complained. But at the end of the month, the Delors Committee was formally set up at the European Council meeting in Hanover, just as Mitterrand and Kohl had envisioned.

     It is remarkable that, back in 1988, before Germany's unification and the collapse of the Soviet Union, the German and French leaders were so deeply committed to stronger European integration and chose such an innovative approach to realize a single currency.

     In fact, forging ahead with European unification was the main historical objective of President Mitterrand, who had initially been hesitant about pursuing such an ambitious course. Years later, when I was governor of the Bank of France, I had several tete-a-tete meetings with him in the Elysee Palace in 1994 and 1995. Mitterrand spoke passionately about his war experiences: battlefields, hardships at the prison camp in Thuringia, and his escape from the camp. It is that kind of direct experience of the war that drove the leaders of France, Germany and other states to pursue the ideal of a united Europe living in peace and friendship.

     In Germany, public opinion was somewhat more prepared to go further in the direction of a political union, a goal considered a proper counterpart to an economic and monetary union. In France, by contrast, only a small portion of the public entertained the idea.

     Another important meeting of the minds took place on Aug. 24, 1989. It was at the Franco-German economic and financial council held on the shore of Lake Tegernsee, in a part of Bavaria that was the constituency of German Finance Minister Theo Waigel.

German State Secretary of the Finance Ministry Horst Koehler, left, and I fly in a helicopter over the recently unified Germany in 1991.

     Germany was represented by Mr. Waigel, Bundesbank President Karl Otto Pohl and State Secretary of the Finance Ministry Hans Tietmeyer. The French delegation was led by Finance Minister Beregovoy, Bank of France Gov. Jacques de Larosiere and myself.

Days of change     

What was new from the German side was its acceptance of the idea of a single currency. Waigel and Pohl said their fundamental concern was the independence of the central bank. "Germany can fully participate in the creation of a single European currency and merge the deutsche mark with other currencies, provided the central bank is totally independent from any political entity."

     What was new on the French side was its attitude on central bank independence, with the delegation saying: "Full legal independence of the central bank is not in the French tradition. It would even require a change in the French constitution. But if Europe is to have a single currency, France understands that a future European central bank should be independent."

     Our breakthrough discussions took place amid a flurry of historical changes unfolding at a breakneck pace in Europe. Five days earlier, on Aug. 19, 1989, hundreds of East Germans arrived in Austria via the Hungarian border town of Sopron. And on Nov. 9, the Berlin Wall would fall. 

     East and West Germany were reunified in October of 1990. Several months later, I flew over the unified Germany with Horst Koehler, state secretary of the Finance Ministry. Crossing the border, I was shocked to see the stark contrast between the perfectly kept farms of the West, and the garbage-strewn fields of the East. From the helicopter, I saw the gigantic challenge the integration of East Germany was about to bring to Germany and to Europe. 

Jean-Claude Trichet is former president of the European Central Bank.

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