Economic Integration in Europe: The Practice of Financial and Economic Cooperation

Дата публикации: 29 апреля 2014
Автор(ы): Dmitri Kourotchkin is the adviser to the President of Belvnesheconombank, Minsk. The author has a degree in philosophy
Публикатор: Научная библиотека Порталус
Источник: (c) "БЕЛАРУСЬ В МИРЕ" No.02 07-01-97
Номер публикации: №1398767333

Dmitri Kourotchkin is the adviser to the President of Belvnesheconombank, Minsk. The author has a degree in philosophy, (c)

Today there is little doubt that the gradual industrial and financial integration of Belarus into the world economic system is one of the main preconditions for Belarus' future economic growth. Such integration means not only this country's achieving a certain level of the country's economic development, but also the national legal rules for economic activities complying with the principles and norms of international business law. At the same time, the integration of Belarus and Russia, based on the principles of mutually beneficial cooperation, also means a broader application of international law, and pressuposes the harmonisation of their international obligations, primarily regarding cooperation with the European Union and admission into the World Trade Organisation.

Among other measures a tremendous amount of work needs to be done to incorporate respective norms of international law into the national legislation. When preparing Belarusian legislative acts, the provisions of international business law should be taken into consideration. Changes in national legislation are needed in order to provide for the creation of favourable conditions for exports of domestic goods and services, and for exploiting comparative advantages of Belarus in the international division of labour.

Meanwhile, international experience shows that norms of the classical international law no longer reflect the diversity and dynamics of integration processes in different continents. In this connection, the study of the European business law-legal rules and regulations which are actively put into practice in the European Union-must be of great importance for our country. The experience of the gradual formation of a single market is, undoubtfully, of interest for all states seeking a stable and efficient economic integration. A clear understanding of these processes would make it possible to choose an adequate strategy of economic and financial cooperation of Belarus with both Russia and the EU states and also countries-our Western neighbours which are likely to join the EU in the coming years.

The Creation of Economic and Monetary Union

Without monetary union and a single currency or firmly fixed conversion rates among the currencies of participating states, together with binding political obligations to maintain the convertibility of their currencies, any deep economic integration is impossible. The single currency is the best way to lift all barriers for free movement of capital, goods, services and and work force.

The planned introduction of the single currency, the euro, within the framework of Economic and monetary union (EMU) is called the most ambitious project for the end of XX century. The implementation of this project will most certainly entail global economic and political consequences. In particular, for trading partners of the EMU member states, including Belarus, it will mean, first of all, a possibility of working in the euro currency zone. It could be an alternative to the dollar or yen zones, since the euro will be one of the most important currencies in the world. The reason is that already in 1996 the EU share of GDP in the OECD countries amounted to 38.3% against 32.5% of the U.S. and 20.5% of Japan, while their shares in the world foreign trade made up 20.9, 19.6 and 10.5% respectively.

The launch of the euro would imply certain advantages for trade partners of the EMU: reduction of intermediary operational costs associated with the existence of different currencies when selling goods and services in markets of the EMU countries, creation of the euro reserve funds to diversify their assets and, finally, the possibility of tying their currencies to the euro. In the long run the single capital market in Europe will help both the governments and business entities of the EMU trading partners mobilise capital on more favourable conditions and will offer more financial instruments for investors.

The introduction of the single currency is crucial indeed for the European banking systems, for it will not only change payment and accounting systems, but radically affect the international settlements, correspondent banking, foreign exchange trading. The euro will affect business strategy and competitiveness of the European banks. The successful completion of the Intergovernmental Conference in June 1997 in Amsterdam has given a new impetus to the European monetary integration and cleared the way to a practical transition to the single currency.

The transition to the euro is to be carried out in three stages. The first one starts in 1998, after the final decision on countries which would qualify, on the basis of their results in 1997, for the convergence criteria of the Maastricht Treaty. According to experts, Germany, France, Austria, Ireland, the Netherlands, Belgium and Luxembourg are most likely to be among the "EMU trail- blazers." Italy, Spain, Portugal, Finland show their interest in joining, once they meet the Maastricht criteria. The recent victories of the Labour Party in the United Kingdom and the Socialist Party in France might somehow affect dynamics of the European monetary integration, but the general schedule of the introduction of the euro remains so far intact.

At the first stage it is planned to set up an independent European Central Bank on the basis of the European Monetary Institute in Frankfurt-am-Main. The key role in the formation of the EMU is to be played by the Council of Ministers of Economy and Finance, responsible for the coordination of economic policies, and the European System of Central Banks which would include central banks of the participating states. At the second stage, in 1999-2001, fixed exchange rates among the currencies of participating states will be set and the euro will be introduced in non-cash payments. Finally, from 1 January 2002, euro banknote and coins will be put into operation: in the first six months of 2002 they will circulate together with national currencies. From 1 July 2002, the euro will be the only legal tender on the territory of the EMU member states.

The EU's Cooperation with CEE Countries

Documents, signed by the heads of EU states this June in Amsterdam, are flexible enough for the EU to have as many as 25-30 countries. And no wonder: while preparing itself for growing global competition the EU should become more open towards the eastern part of Europe. Now EU's eventual gradual eastward enlargement brings forward practical issues of close economic and financial cooperation between the EC and the countries of the Central and Eastern Europe (CEE). In the long run all countries which wish to join the EU will have to meet the convergence criteria. Undoubtedly, the new candidates to the EU will have a long way to go before they meet these criteria, though Poland and especially the Czech Republic, judging by some economic indicators, have already come closely to the target figures.

It should be taken into account that the expected EU eastward enlargement coincides with the final stage of the formation of the EMU. The EMU is important for further development of the CEE economies. This is because the national currencies of these countries could be tied to the euro, and, therefore, CEE candidates would have better chances to join EMU in the beginning of the next century. Even now the D-mark plas a very important role in establishing the real exchange rate of the Polish zloty, the Czech koruna and the Hungarian forint. The Estonian kroona joined the D-mark currency zone and the Bulgarian lev is to follow the move in July 1997.

Transition to settlements in the ECU, the forerunner of the euro, is one of the ways to a rapid and effective integration of the CEE and the Commonwealth of Independent States (CIS) countries into the common European structures. As early as in 1990, a project to establish an interbank ECU-based clearing payment system for the CEE countries was put forward by Jacques Delors, and in 1992 ten banks from the CEE countries and Russia signed an agreement on introducing an ECU-based clearing payment system. This agreement provided for the establishment of the Interbank Association which included leading banks from the EU, CEE and CIS countrries. In 1996 the Bank Association for Central and Eastern Europe was created by banks from Germany, Belgium, Italy, Poland, Hungary, the Czech Republic, Slovakia, Bulgaria and Russia. Thus, a clearing interbank payment system for the EU, CEE and CIS countries is being created. Now this system links over 50 banks, and banks from other countries can join.

Belarus and the European Union

Gradually the economic cooperation between this country and the EU is gaining a firm legal basis: in 1995 an agreement on partnership and cooperation between the Republic of Belarus and the European Union and in 1996 an agreement on trade and related matters were signed. Despite all the difficulties the preparatory work for joining the Council of Europe is continuing.

Forms of economic cooperation with the EU depend on the extent of conformity of Belarusian legislation with European law. Still, an effective solution to attain a fuller conformity is not a hasty adoption of legal rules which do not reflect the specific features of the national economy, but a steady growth of direct ties between Belarusian and European business entities. Relations between Belarusian and European partners will be gradually forming a real basis for working out related legal rules.

Currently, the EU states are among most important trading partners of Belarus. In few years from now, when Poland, the Czech Republic and Hungary join the EU, their share in Belarus' foreign trade will dramatically increase. In essense, along Belarus' western border, a single economic and currency area comparable with that of the U.S. is emerging. This means that Belarus will find itself in a completely new geopolitical and economic environment. With this in mind, a thorough analysis is required to assess the new environment for Belarus. The objective of such analysis should be that of defining ways to exploit emerging opportunities under sound policies or, if there is no sound policy, to scale down negative effects.

The necessity for Belarus to study various aspects of the adoption of the single European currency is quite obvious, too. Special attention should be paid by domestic business entities to the study of legal aspects of the introduction of the euro. The euro should draw attention not only of our bankers, but also of managers of export businesses, software manufacturers, economists, and, perhaps, a special interagency structures, representing both respective ministries and banking institutions, should be set up.

The Establishment of the Single Market of Financial Services

By now, West European countries have reached a high degree of convergence of their national economies. Today the European Union is as close to the emergence of an integrated financial market as never. It should be admitted, however, that even after decades of currency integration (the objective of the introduction of the currency union was put forward as early as in 1969) the EU member states are still working through its mechanism. This mechanism includes general rules of conducting currency interventions to maintain exchange rates of the currencies of the participating states, the establishment of the regime of interdependent exchange rates of their currencies and the creation of the reserve curreny and reserve currency funds. The European Monetary System (EMS), aimed at achieving a compromise between maintaining the currencies' parity and developing economic convergence, has been operational since 1979.

Harmonisation of national interests and mechanism of integration in the field of financial and monetary regulation in the EU are of great interest for the nascent Union of Belarus and Russia. This Union provides for unification of monetary, budgetary and taxation systems, creation of necessary conditions for the introduction of a single currency. In a broader context, the financial interaction between the CIS member states is likely to require a critical assessment of the relevant EU experience.

Of paramount significance is theconceptual basis of the integration process: the creation of the economic preconditions; the unification of customs, monetary, taxation and civil legislation; the formation of a single market of goods, services, capitals and work force; multi-velocity monetary integration. Unremitting attention is to be paid to a detailed working out of the legal basis for the integration process: all the agreements shuold be checked with business circles and ratified by parliaments, and supranational bodies should be vested with not only coordinative but also law-making powers.

It should be emphasised that the sequence and continuity of the stages of integration are vitally important. For example, the gradual movement towards the monetary union in Europe was done in the following way: in the early 1960s the EC member states adopted laws facilitating free movement of investments; then, twenty-five years later, in 1986, a directive was adopted to provide for liberalising movement of capital under long-term commercial transactions, anf for issuing securities with no quotation at stock markets; and, finally, several years later, in 1990, the EU member states withdrew controls over capital movement within the EU. This paved the way to the monetary union which was legally launched by the provisions of the Maastricht Treaty.

Directives play a major role in the practical regulation of integration processes. These secondary legislative acts address one or several member states, and, being legally binding, they provide respective members with a choice of forms and methods of its implementation. Legislative acts of this sort reduce interference into national legal systems, and let member states implement EU acts with due regard to their specific conditions.

For example, "The Freedom of Capital Movement Directive" provides corporate and private customers with the opportunity to move their funds within the territory of the countries which have adopted respective national acts for the implementation of the directive. "The Second Banking Directive" introduces a licensing system of the European banks. The system is based on the principles of reciprocal recognition of bank branches and entitles the respective authorities of the country of origin to supervise banking activities.

"The Investment Services Directive" introduces a unified licensing system in securities market, in accordance with which any financial institution seekeng to do this business within the EU will have to obtain a special common license. It gives the opportunity to any bank or investment company with the license to purchase securities at stock markets and become their member in any EU member state. In 1996 two important directives in the field of financial activities came into effect:

the one referring to funds of investment companies and credit institutions, and the other specifying investment servicing in the sphere of liabilities.

By 1997 about 90,4% from 1,308 EU directives related to the single market have been incorporated into national legislation of the EU contries.

This experience deserves attention of those who will put into effect integration initiatives of Belarus and Russia. The creation of the single market of the financial services envisages certain measures which are already known from the experience of the moves towards the EMU by the European countries. Respecting the logic of the process, it is necessary to translate the common plan of integration into concrete steps in accordance with the realities of the financial and economic systems of our countries.

Опубликовано на Порталусе 29 апреля 2014 года

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