There will then be a maximum six-month period before the national currencies cease to be legal tender, at which point the transition to the euro will have been completed. Again, during this period in relation to the transition of retail transactions the guiding principle will be no compulsion and no prohibition, although collective efforts will no doubt be made by retailers and banks to shorten the period of dual denomination as far as they can. As far as the UK is concerned, the new Government -- while not definitively ruling it out -- has pointed to formidable difficulties in the way of participating in the euro from the beginning, and promised a referendum before the UK could join. A key consideration for us is likely to be whether -- on the basis of our assessment of the extent to which convergence has indeed been achieved -- the euro-area is a safe club to join in its early stages. If the Government were to decide not to join, at least at that point, it will be crucially important -- in our own national economic interest, and in order to avoid creating unnecessary problems for the euro-member countries -- that we continue to pursue, in parallel with those countries, the consensus policies of monetary and fiscal discipline. If EMU goes ahead, whether or not the UK is a part of it, it is clearly in our interest that it should succeed.
The City of London thrives on broad, liquid markets regardless of currency, and provided we are prepared -- as we will be from 1 January, 1999 - to quote, trade and settle in euro, as we are now in dollars or yen or DM, then I am convinced that the broader markets in euro instruments will represent an opportunity rather than a threat to the City. The fact is that overseas-controlled financial institutions are continuing actively to build their presence in the City, notwithstanding expectations that the UK will not be among the initial euro-member countries -- and this suggests very strongly that they take the same view about the City’s future. I am quite confident that here in Hong Kong you will continue to be able to conduct your European financial business in euro in London, just as you do now in DM and French francs. So now then, Mr Chairman, should I answer the question in my title? One euro-currency at some point, certainly most probably from 1 January, 1999. Fifteen countries? I doubt it from that date, but eventually who knows? BIS Review 89/1997