In 1968, the US dollar convertibility to gold was limited to central banks alone, and was soon permanently archived by Nixon in 1971 together with the “Bretton Woods system” on which the former had been established. In the same year, 1968, the European Common Market fully entered into force, much earlier than the expected duration for its transitory phase. The first contradiction in the path toward European integration unfolded. The market, which had come into being thanks to a “good currency”, founded on the common reference to the US dollar, found itself oscillating through fluctuant exchange-rates and competitive devaluations, putting its survival at risk. European responses demonstrated a well-timed and farsighted understanding of the problem, but were too fragile to tackle the immediate speculation. The Barre Plan of 1969 opened the way for policy convergence among European economies and those countries in difficulty that were implementing support mechanisms to restore stability in terms of their balance of payments. The Werner Report of 1970 formulated a road map aiming to achieve a European currency union in three phases. In 1971 the so called “snake in the tunnel” was created; an attempt that revealed, as predicted by federalists, its truer “eel-like” nature.
It was in this same circumstance, following a EU federalist initiative, that a European Conference for a unified European reserve monetary system was held in Turin in November 1970, the Proceedings of which were published by Lo Spettatore Internazionale (IAI) with an even more explicit and prophetical title: Verso una moneta europea (literally, “Towards a European Currency”). Among other respectable personalities taking part in the conference, we can mention Robert Triffin and Rinaldo Ossola, who had designed an innovative and far-reaching financial tool, the “Special Drawing Rights” (SDRs) vis-à-vis the IMF, Mario Albertini, President of the MFE, as well as John Pinder, leader alongside Lord Beveridge of the British federalists. The main conclusion of that particular meeting was that the SDRs would remain a tool aiming to create a limited and conditional international liquidity, considered the American national interest, as long as the Cold War bipolar system endured and no multipolar equilibrium was to take over. The European pole was developing fast. Robert Triffin left his positions at Yale University and the IMF (where he had served as the first director of the European Bureau between 1948-49) and came back to teach at Leuven, while reacquiring his Belgian citizenship and dedicating his life to the creation of the European currency by collaborating with Jean Monnet and the European Commission. Following both a theoretical and a practical analysis, in one of his essays Albertini drafted a strategic program on which our future action was to be based1. In addition, he endorsed the creation of the Euro as the key-objective of the federalist movement. Everyone knew from that moment on that the creation of the Euro would bring about a new contradiction, while pushing governments towards a European union of national central banks, and towards a European federal budget and a European-level political power. But we also knew that the Euro was due to re-balance the existing world system and not to replace the US hegemony with another one. Since the 1981 Congress, Albertini called for the MFE to “unite Europe in order to unite the World”.
Many of the conditions, inexistent at that time, allowing the creation of symmetrical world reserve-currency, independent from the states’ national interest altogether, are now present at the global level. With the Euro, an alternative reserve currency to the American dollar was created, shortly acquiring a considerable role in the diversification of public reserves and in people’s pockets. However, thanks to Triffin, in Europe (as in China and elsewhere) there is the awareness that his “dilemma” regards not only the US dollar but also the Euro and any other national currency which is going to be an international currency. Furthermore, the weight gained by the BRICS in world economy has restored the previous situation, which saw the US and Europe’s predominant roles, while forming a multipolar world, at least economically speaking. In tandem, the American attempt to replace the bipolar equilibrium with a sole geopolitical Empire (“the End of History”) quickly dissipated its own credibility. In 2009, the Triffin International Foundation, boosted by its President Alexandre Lamfalussy and Vice-president Alfonso Iozzo, launched the 21st Century Triffin Initiative, later referred to as “Triffin 21”. The inaugural lecture The Ghost of Bancor: the Economic Crisis and Global Monetary Disorder was held by Tommaso Padoa Schioppa on February 25, 2010, in Louvain-la-Neuve. Later in May, the Compagnia di San Paolo and the Triffin Foundation organized the symposium Towards a World Reserve Currency. In October, Michel Camdessus2, Alexandre Lamfalussy3 and Tommaso Padoa Schioppa, with the support of the Triffin Foundation, gathered a group of 18 leading institutional actors (former ministers, governors and public managers) in order to evaluate the international monetary system and to propose the necessary changes for it to be stable while reducing the risk of future crises. Their group is known as the Palais Royal Initiative. Tommaso Padoa Schioppa passed away on December 18, 2010. As written in the final report of the Palais Royal Initiative, “Reform of the International Monetary System: a Cooperative Approach for the 21st Century”, published by Sage in 2011, edited by Jack T. Boorman4 and André Icard5: “[W]ith him, the world has lost an eminent architect and advocate of the global common good”. In 2011, on the occasion of Robert Triffin’s (1911-1993) 100th anniversary, the Foundation organized in Brussels a conference entitled In Search of a New World Monetary Order (memoranda published by Peter Lang, 2012).
In memory of TPS a conference was held last year on November 26 in Turin’s Congress Center, situated in the post-industrial area of Lingotto, promoted by the Triffin Foundation and the Fondazione Agnelli, entitled The International Monetary System 70 Years after Bretton Woods: The Role of the Special Drawing Rights. The late Padoa Schioppa was commemorated by Fabrizio Saccomanni6 in his speech: Tommaso Padoa Schioppa and the problem of stability of the world monetary order, with the technical competence of a central banker and the affectionate nostalgia of an old friend.
The meeting promoted the presentation and discussion of the last paper elaborated by the Triffin Foundation’s working group: “Using the Special Drawing Rights as a Lever to Reform the International Monetary System”. The report’s main themes were presented by Bernard Snoy7 in his welcome address and by Camdessus who, in the conference’s first speech, endorsed them with his authoritativeness. The paper was discussed in detail by the group’s coordinator, André Icard, followed by its other members: Alfonso Iozzo (who directed the workingprocess), John Williamson8, Jean Claude Koeune9, Paul Spahn10, Christian Ghymers11 and Elena Flor12. The rationale that inspires the report is the so-called second best solution: not yet a world reserve-currency, but a basket of currencies functioning as such. Not a Euro-like currency, but an ECU-like basket, namely, the SDRs. Those are already present in the economic system but need to be reformed in order to be effectively suitable for this role. First of all, it is high time for the composition of the basket to change and include the Chinese Yuan (formally called renminbi; the next revision of the basket is planned for the year 2015), as well as other newly-industrialized countries’ national currencies. Consequently, there is the need to reform the IMF’s own governance, an objective not easy to achieve. In 2010, the G20 decided, among other things, to launch a reform of the IMF governance, still dominated by the USA (whose quota gives them the veto power) and Europe. The expectation that a slight amount of 6% in IMF voting rights would be shifted from the developed countries to the emerging and developing ones, was shattered since no step forward had been possible as a result of the US Congress’ refusal to cooperate, thus confuting the US President’s word (a frequent event in American political history).
Hence, we cannot be surprised that the interest at the Lingotto Conference was largely centered on the argumentations made by the Chinese discussants who attended: Ping Sun13 and Qiao Yide14. Their contributions shed light on how the integration of the Chinese Yuan in the SDRs’ basket would sustain the currency’s stability as well as that of the international monetary system as a whole, and how the conditions, mentioned in the IMF’s forecasts, have already become reality, since convertibility is not a necessary qualification, while the variation in the basket does require the IMF approval, but does not require further parliamentary passages.
High institutional attention is demonstrated first of all by the written account by Italy’s Minister of Economy and Finances, Pier Carlo Padoan, that day engaged in Brussels, rich in stimuli concerning the “Triffin 21” Initiative, followed by those of Andreas Bauer15 and Pietro Catte16. Equally significant is the presence of organizations which pursue similar objectives to those promoted by the Triffin Foundation, therefore opening the way to collaboration, as pointed out by Marc Uzan17 and Alexander Swoboda18.
The main reserve currencies are the US dollar and, more recently but in rapid growth, the Euro. Their coexistence in playing this role (as both currencies are subject to non-global interests and logics), however, cannot last for long, as the historical experiences of bimetallism have demonstrated. The game is wide open between those hoping for the evolution towards a multipolar system, which would be based on the rethinking of SDRs as a first step, and those nostalgic of a unipolar, one-state based hegemony, no longer legitimated either by its relative weight in the world economy, or by its financial and/or military successes. On the contrary, the USA encounter continuous catastrophes in both the first and the second field, although the try to drop the costly outcomes of its own doings on the shoulders of the rest of the world.
The attempts to eliminate the Euro, rejected with heavy losses as a result of Mario Draghi’s “whatever it takes” in 2012, repeated themselves this year. A declaration by the President of the European Stability Mechanism sharply rejected the attacks against Greece: the Greek debt is “bulletproofed” for a long period of time and with low interest rates by the ESM and the ECB. The saboteurs had no hesitation in attacking directly Jean-Claude Junker, as soon as he was starting to taking his role as the first head of government elected on a European scale. However, this went by without success, as they could not wide open the hoped cracks in that “out of sorts” team. Consequently, now they may well turn against the only debt too big to be defended by the European financial solidarity, the Italian one, with the help of improvident declarations by political actors that have no other scope in life than providing their “profitable services” against Europe (against their Homeland, should I say).
This is why, while we have been doing our best in order to follow Albertini’s instructions to “unite Europe in order to unite the World”, we cannot disregard to consider the feebleness of a “one-country federalism”. Today we must also “unite the World in order to unite Europe”, lest we be left alone (and still divided) in the storm. In this respect, the idea of creating the conditions so that the SDR could perform increasing functions of international monetary stability constitutes the most concrete way to defend the Euro, Europe’s prosperity, and with the latter its “social market economy”, thus the very perspective of a federal European political power.
Translated by Alon Helled
1 Mario Albertini, “Le problème monétaire et le problème politique européen” in Le Fédéraliste, n. 3/1972
2 Former Managing Director of the IMF in Paris
3 Former General Manager of the Bank for International Settlements in Basel
4 Former Director of the IMF Policy Development and Review Department in Washington D.C.
5 Former Vice-General Manager of the Bank for International Settlements in Basel
6 Former Deputy Governor of the Bank of Italy in Rome
7 President of the Triffin Foundation, where Lamfalussy is now a honorary President
8 Former member of the Peterson Institute for International Economics, Washington D.C.
9 General Secretary of the Triffin Foundation
10 Honorary Professor of Economics at the Goethe Univerität, Frankfurt am Main
11Vice-secretary General of the Triffin Foundation
12 The Triffin Foundation, Turin
13 China's Alternate Director for the IMF, Washington D.C.
14Vice President of the Shanghai Development Research Foundation (SDRF), Shanghai
15 Director assistant, IMF, Washington D.C.
16 International Relations, Bank of Italy , Rome
17 Executive Director of the Reinventing Bretton Woods Committee, Paris
18 Honorary Professor of International Economics, Graduate Institute of International and Development Studies, Geneva