The euro area should speak with one voice on exchange rate issues in all international institutions, the European Central Bank Governing Council member Lorenzo Bini Smaghi said Monday.
Speaking at a conference entitled Towards a European Foreign Economic Policy organized by the European Commission in Brussels, Bini Smaghi said, It is my conviction that a unified representation of the euro area countries at the IMF would strengthen the exchange rate policy of the euro.
He said even though a single currency implies a single exchange rate, the euro area representatives in the International Monetary Fund Executive Board do not always sing from the same hymn sheet when discussing exchange rate developments in other major countries.
Further, he said there is a need for verbal discipline when making statements on exchange rate. Only the President of the ECB and the President of the Eurogroup should comment on the exchange rate of the euro. The authorities which are not mandated to speak should heed the adage: silence is golden, he said.
At the same time, he noted that public statements or even outright interventions in FX markets may be warranted if exchange rate markets are prone to episodes of overshooting and undershooting.
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