These preparations, both in the financial and the real economies, are the preparations which prospective ‘ins’ need to make, in particular. But there are of course preparations in financial markets which apply to everyone. We are in no doubt that the introduction of the euro in 1999, if the current timetable is maintained, will have profound consequences for financial markets, initially for wholesale markets, and later for the retail financial sector too. It is incumbent on all central banks to seek to ensure that the financial markets in which they sit are as well prepared as they can be for this momentous change. We must also ensure that the central banks themselves are well prepared. At the Bank of England we now have a steering group, which I chair, focused on preparing the Bank itself. We have made a clear decision that the Bank will be ready for UK membership of EMU in January 1999, if a future government decides that that is the right course for the country. But our more important work in the short term is focused on preparing the City of London and on preparing the financial infrastructure which the City will need to maintain its position as the most innovative and dynamic financial market in Europe. I should emphasise that we see the City as a financial market for the whole of Europe, not just for the United Kingdom.
We understand that to build one European wholesale financial market will require a staple diet of solid Bundesbank fare, seasoned with a soupçon of Banque de France, a ración of Banco de España, and so on, as well as a couple of pints of Bank of England pragmatism. There is one important area, I think, in which it has not so far been possible to reach an agreed solution, and one on which I might just conclude with one or two observations. That is the question of TARGET, the inter-linking of real time gross settlement systems across Europe. There are two issues of interest, here. First, pricing policy. We have argued that the pricing of the national element of cross-border payments should relate to national costs, rather than being set uniformly. So far we have not prevailed on that point and, as long as the competition authorities approve, it is likely that there will be a common price within the TARGET system for cross-border transactions. Unfortunately, some of our colleagues do not believe this is an area in which competition should intrude. The second important question relates to the terms on which ‘out’ central banks might link to TARGET in the future. We can see no reason why out central banks should not be able to link to TARGET on the same terms as those which apply to the ins. We accept, of course, the need in both in and out countries for rigorous policing to prevent unintended spillover of intra-day credit into the overnight market.