Abstract

An Assessment of European-American Monetary Relations

European-American international monetary relations are in a state of transition; they are inadequate, controversial, and lack both a common purpose and formal system or institutional framework for policy coordination. At present, a significant divergence has emerged between U.S. and European attitudes towards narrowly defined international monetary cooperation (i.e., exchange and interest rates). Views about broadly defined financial relations (i.e., global monetary and financial structure, operation, environment) are, however, less divergent. Moreover, there is a significant inconsistency between American foreign policy and international monetary/ financial policy vis-a-vis Europe, particularly in the narrowly defined monetary relations. The trans-Atlantic controversy concerning foreign exchange and interest rates remains unresolved, and the disparity between European-American monetary relations is expected to continue in the future. Efforts aimed at eliminating this gap or promoting common interests are neither likely nor warranted. Therefore, the forthcoming Western Economic Summit is not expected to resolve the U.S.-European controversy. Finally, the outcome of the French Presidential elections has introduced substantial uncertainty into the European Community and diminished the prospects of the European Monetary System and its global impact. Currency issues could pose very difficult problems for the Europeans and create a zone of monetary instability with significant effects on intra-European flows of trade and investment. Against this background, the reeemergence of the U.S. dollar is well underway and the question of Atlantic monetary cooperation has become relatively insignificant for U.S. policy makers.