One of the early tasks of western advisers was to try to convince the would-be central bankers in the east that monetary policy was not just a matter of regulating the supply of banknotes. And many of the same people found it difficult to accept that the provision of credit by a central bank whether to government or to enterprises - is likely to have inflationary consequences. When the basic problem is a shortage of national savings (often because the state is pre-empting private savings through its budget deficit and off-budgetary spending), the central bank cannot magically create extra real resources by relaxing monetary policy. Were it so, we central bankers would be even more popular people than we are now. The response of the eastern European and CIS central banks to their new goals has been tempered by a number of factors: -  how long the old culture had prevailed;  -  how democratic the new regime is (independent central banks do not get on well with autocracies);  -  the size of the country;  -  the availability of foreign currency to the government, whether from export revenues (oil or gas) or loans from international financial institutions; and  -  in the case of the ten (yes, ten!) applicants from the region to join the EU, how quickly they believe they need to move into line. The differences between these central banks are perhaps most marked in relation to monetary policy and financial relations with the government.
I shall confine myself largely to what is happening in Europe. The increasing globalisation of financial markets is one pressure for change across the world. But in western Europe, the Maastricht Treaty and the preparations for Economic and Monetary Union are requiring central banks to review their statutes and to align their operating procedures. But I also want to talk about the central banks of Eastern Europe. They are feeling similar pressures several hope that their countries will accede to the European Union within five years or so - but their origins are very different. In 1989 most of the state banks of central and eastern Europe had little understanding of the rôle of a central bank in a market economy. Since then they have had rapidly to acquire the knowledge and skills needed to tackle acute inflationary pressures while many of their leading banks were effectively bankrupt. At the Bank of England, we have been actively involved in helping them by drawing on our own experience as central bankers, adapting the lessons we have ourselves learned over the years to the unique circumstances of the transition economies. Much of this effort has been channelled through our Centre for Central Banking Studies which we established in 1990 to provide technical assistance and training to other central banks.