Jean-Pierre Roth: The creation of the euro and the new international monetary order - a view from Switzerland Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the 2nd Conference of the “Geld und Währung” Foundation on Financial Stability and Globalisation, Frankfurt, 3-4 June, 2004. *  1. *  *  Introduction  It is widely acknowledged that the birth of the euro on January 1, 1999 was a milestone in the process of European integration. Giving up national sovereignty in monetary matters was a very bold move of truly historical proportions. It will have long-lasting economic and political consequences. It should promote efficiency, transparency, and growth. The creation of a single currency should also act as catalyst towards further European integration. Moreover, and this is really what I would like to focus on today, the creation of the euro has changed the world’s monetary landscape. I believe that one can say without fear of exaggeration that it has led to a new international monetary order. And for most of it, this is very good news indeed. 2. Our pre-euro fears  To be honest, I must admit that prior to the introduction of the euro we were somewhat worried at the Swiss National Bank. Although we fully appreciated the benefits that Switzerland would draw from the creation of the euro in terms of increased transparency and lower transaction costs, we were also quite concerned about possible risks. We had three main fears.
Over the past five years, the real exchange rate has moved within a relatively narrow band little more than five percentage points wide. Except for the post-September 11 period, when the Swiss franc appreciated markedly, the external value of the franc has largely reflected economic fundamentals. In fact, even the post-9/11 safe-haven effect was relatively mild compared to what we experienced in the past, during the seventies and the eighties, for instance. 4. A new international monetary order  I believe that one could make the case that the introduction of the euro has brought about a new international monetary order, that it has produced an element of stability that benefits many countries, not just Europe’s immediate neighbours, but nations around the globe. As we have seen, movements in the dollar/mark exchange rate were magnified as far as the Swiss franc is concerned in the past, but are much dampened today. When the euro depreciated against the dollar, the Swiss franc did so too, but by a much lesser degree. And later, when the euro appreciated against the dollar, the franc appreciated as well, but again to a lesser extent. In other words, our effective exchange rate has been less affected, the movement of the dollar being offset, at least to some extent, by a movement of the euro in the opposite direction.