BUNDESBANK president, Dr Hans Tietmeyer, has said that the future single European currency, the enro, would not automatically be stable against the dollar and would have to earn its reputation.
"The European central bank must earn this reputation (for stability)," Dr Tietmeyer said in the text of a speech for a reception, sponsored by German vehicle maker, Mercedes Benz AG in Hanover.
"That can under the circumstances take a while because credibility can mostly not be built overnight," he said.
Dr Tietmeyer said he hoped the euro, due to be launched in January 1999, would not fluctuate against the yen and dollar as much as the deutschmark currently does.
He again pushed for a detailed stability pact to secure public budgets once the new currency was launched.
European finance ministers and officials met in Dublin at the weekend. They cleared key hurdles in the quest for a stability pact to control public spending once countries enter monetary union, but failed to agree exactly how the deal will work.
"It cannot be allowed that, after the start of currency union, countries put their feet up on the table in terms of stability policies because of the lack of effective sanctions," Dr Tietmeyer said.
He said there were still a few important questions left open after the Dublin meeting.
He warned that fiscal criteria for entry into currency union should not be seen as less important than other requirements set out in the Maastricht Treaty.
"Experience shows that sooner or later slack finances endanger monetary policy," he said.
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