Euro sparks call for Asian unity
ASIA will face a spectre of sharper volatility in its foreign exchange markets after the introduction of the single European currency in 1999 because the speculators will shift their attack target primarily to this part of the world, European and Asian officials attending the Europe-Asia Finance Ministers Meeting warned yesterday.
They said since the Euro is likely to become a strong and stable currency, backed by the European Central Bank, it will pre-empt, or make it tougher for, the international hedge funds to attack and make money against the Euro. Instead, speculators will turn their appetite to the easier target of Asian currencies, they said.
Singaporean Finance Minister Richard Hu Tsu Tau recognised the prospect of a threat to regional currency stability after the creation of the Euro, and called for Asian countries to strengthen their cooperation. He added that Asian nations should explore common measures to fend off speculative attacks.
Finance Minister Thanong Bidaya went so far as to call for the establishment of a ''special mechanism" to defend Asian currencies from speculative attacks in view of the growing volatility in global financial markets.
The Euro is expected to become a reserve currency, rivalling the US dollar and Japanese yen. Yves-Thibault de Silguy, the European Commissioner for Economic, Monetary and Financial Affairs, expected the Euro will account for a higher proportion of central banks' reserves than European currencies today.
He said the strength of the Euro lies in the convergence criteria of the member European countries, which aim primarily at combatting inflation and stabilising prices. In addition, the European members have agreed to a stability and growth pact involving balancing their budgets by 2002 the same year as the US game plan, he said.
The present currency turmoil in Asia has aroused concern about future growth and stability in the region, and there have been unofficial discussions about closer macroeconomic cooperation, sound financial and foreign exchange policies, and a better supervision and regulatory frame-work.
Malaysian Finance Minister Anwar Ibrahim also urged Asian countries to adopt an effective mechanism to defend their currencies from speculative attacks, possibly through an Asian fund.
Details of this Asian fund will be discussed in Hong Kong next week in the corridors during the annual World Bank/IMF meeting, he said.
Chinese Finance Minister Liu Zhongli politely threw his support behind Malaysia's proposal, although he cautioned that Asia still lacks an ideal model for a sweeping financial reform. He added that China is willing to play its role in stabilising the foreign exchange markets in this region.
Japanese Finance Minister Hiroshi Mitsuzuka admitted that there has been more talk about cooperation through a regional monetary system, yet he side-stepped clarifying how Japan will define its role, or whether it will allow the yen to become an anchor currency.
''I know that there are ongoing discussions between Asia-Europe and the IMF and that there is a necessity for cooperation on a regional basis on this matter. But my position now is that I will refrain from making any comments," he said.
BY JEERAWAT NA THALANG, THANONG KHANTHONG
