EMS UNDERWAY: After a delay of approximately 2-1/2 months, the European Monetary System (EMS) has finally begun. Approval for the EMS launch was given at the Common Market Summit conference early this week in Paris.

   The EMS was delayed because of a French-German dispute over the Common Market's agricultural pricing structure. This was resolved last week when France accepted a compromise. Significantly, the British, whose food prices have been pushed up because of the subsidies granted continental farmers, did not accept the compromise arrangement. Since Britain will not join the EMS either (although the pound will be kept in line with the eight other EMS currencies) London's reputation as Europe's "odd man out" is growing.

   It is too soon to predict the short-term impact of the EMS, and its clearing-house European currency unit (ECU), on the U.S. dollar. Some sources actually think the initial effect may be good, since the goal of the EMS is to create more order in monetary markets by creating a "zone of monetary stability" in Europe.

   On the other hand, the EMS set-up shows signs of attracting to its member states massive shifts out of the dollar, simply because the powerful West German mark will be the king-pin currency behind the ECU, and the EMS countries will have to adopt more conservative economic and monetary practices to keep in line with the mark. In this light, Business Week for February 26, 1979 reports that "in what may be a foretaste of things to come, investors have already jumped the gun to pour hundreds of millions of dollars into the Danish bond market."

   The impact of the EMS, of course, extends beyond mere money reform. "The EMS was hatched as much as a political initiative as an economic one," reports the March 21 Wall Street Journal, adding: "German Chancellor Helmut Schmidt and French President Valery Giscard d'Estaing were its prime backers, supported by Roy Jenkins, the president of the European Commission, the Common Market's executive body. Mr. Jenkins hopes the EMS will eventually lead to full economic and monetary unity for Europe, featuring a common European currency and joint economic planning."

   In a recent interview, Mr. Jenkins said: "This is a major step along the road to economic and monetary union, from which one could make a choice to go on. It arose from a reawakening of the idea that Europe will make itself by its money. In that sense it's a strongly integrating force."

Gene H. Hogberg, News Bureau

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Pastor General's ReportMarch 13, 1979Vol 3 No. 8