Council of Esquarium [IC, Closed]

[The Greater Bohemian Union]

"The Bohemian Delegation will also co-sponsor the Financial Exchange Mechanism Act proposed by Katranjiev."

[FreYhill]

"This is cancer though" the Toksanese ambassador scoffed under his breath. "Mr. President, the Toksanese Commonwealth is staunchly opposed to this mechanism that would lead to a single currency."

[Korizland]

"While I find that the language of the treaty does not bar such an act, it is not the opinion of Her Majesty's Exchequer that a common currency or exchange rate mechanism will serve as a benefit to Korizland or the Esquarian Community. This could cause recessions in smaller economies as the stronger currencies have their appreciation arrested. These recessions will assuredly result in less trade, not more, and do damage to the very purpose of our community."

[Lanos]

"Besides, who will bail out the countries that fail under these recessions?"

"Pray tell, would we all need to bail out a nation that failed under the single currency?"

[Katranjiev]

Now that she had the bill sponsored by both Montecara and Bohemia, which had just walked into the room, she was ready to place the bill before the table once again.

"Mr. President," Kishisheva said, "considering that the delegations of Montecara and Bohemia have agreed to sponsor this bill, I would like to once again reintroduce this bill to the Council of Esquarium, so it may be entertained and discussed." She hoped that this time, her colleagues will suggest edits to make sure that it passes.

Financial Exchange Mechanism Act

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Preamble
In light of the growing expansion of the Esquarian Community over the past year;
Noting that with the integration of the Greenwich Area into the Common Market, it has become easier for persons, goods and services to travel across borders;
Concerned that without some sort of exchange rate mechanism to reduce inequalities among the members of the Common Market, it shall motivate nations to devalue their currencies to increase the value of their exports;
Also wishing to simplify internal accounting processes within the Esquarian Community and to reduce its reliance on the USD;
The Esquarian Community hereby enacts the following provisions:

EC Exchange Mechanism

1. Establishes the EC Exchange Mechanism, hereafter referred to as the ECEM
2. Defines the ECEM as a currency basket of all currencies of member states within both the Esquarian Community and the Common Market
3. Calculates the exchange rates between all currencies within the Esquarian Union via:
   
   1. Calculating the average value of all currencies within the Common Market relative to the NSD to create the raw exchange rate
   2. Calculating the share of each country to the total gross domestic product of the entire Common Market
   3. Assigning weights to the raw exchange rate, so to ensure that the exchange rate is not severely overvalued or undervalued relative to the country's economic share within the Common Market, creating the official rate to the NSD
4. Permits exchange rates of all ECEM currencies to fluctuate in a 12% band, hereafter referred to as the ECEM band, from +6% above the official rate to -6% below said rate
5. Permits countries in the Esquarian Community and the Common Market to suspend its participation within the ECEM system if the exchange rate between their currency and the NSD becomes seriously undervalued compared to what would be if they were not part of the ECEM in the first place
   
   1. If they desire to opt out of the ECEM system via this section, they must request the Secretariat to suspend their participation in the ECEM system based on that criteria
   2. If the request is granted, the nation shall not participate in the ECEM system until the nation's currency has become overvalued
   3. When the currency becomes overvalued compared to the exchange rate, the nation shall participate in ECEM again

Esquarian Currency Unit

1. Establishes the Esquarian Currency Unit, hereafter referred to as ECU:
2. Defines one ECU as:
   
   1. having the value of the official rate of the ECEM to the NSD
   2. being an internal unit of account within the EC

Application

1. The ECU should be adopted by all EC institutions by no later than January 1, 2018 for all purposes
2. The ECEM system shall be phased in between January 1, 2018 and January 1, 2020; during this time:
   
   1. All currencies must begin to apply the ECEM band to their currency, and prevent their currencies from rising above +6% or falling below -6% from their exchange rate as of December 31st, 2017, but they are still permitted to float or maintain their existing pegs
   2. Refusal to implement the band during the transition period shall result in a 2.5% penalty that shall be added on top of their member fees
3. On January 1, 2020, all currencies within the ECEM system shall adopt the official exchange rate between their currency and all other currencies, but from that day on can increase or decrease their value within that band
4. Declares that the ECU and the ECEM mechanism shall be administered by the Treasury of the Esquarian Community

Once she had tabled the bill once again, she was ready to answer the questions fielded by the delegates.

"Mr. President," Kishisheva remarked, "in regards to the concerns made by the Korizian delegation, I would like to state that as one of the smaller economies in this union, albeit not the smallest, the Kingdom of Katranjiev feels that having a common exchange mechanism and a unit of account can help ensure that we reach a fundamental goal set out in the Charter via this clause outlined here in the Preamble: 'Affirms their collective will to cooperate in the advancement of Esquarian integration...'"

"Such a mechanism would enable the EC to continue along the path of integration," she remarked, "and thus while in the short term, there may be some problems, I imagine that in the long run, once we worked out the kinks, we will be able to proceed further along in the process of Esquarian integration."

"As well," she added, "while I agree that smaller nations may experience some pains, the fact that there are no tariffs among the EC members means that even with the band, trade will probably continue as is because it would still be easier to move goods and services across borders of EC member states than international borders."

She paused for a few moments.

"Also, Mr. President, with due respect," she stated, "if I may address the Lanosian delegation, the ECEM mechanism that I have proposed is not, and I state, is not a common currency. The ECU that will be pegged at par to the ECEM, as a matter of fact, would not be imposed on all the member states for their national finances: I expect that folks in Talnakh will, when entering Luziyca, continue to exchange their zalots to lira for the time being, for instance."

"Maybe in ten or twenty years, we may reopen the issue of a single currency for day-to-day use across the entire EC, but right now, the EC as it stands cannot support a single currency," she declared. "The ECEM mechanism may be the seeds for a common currency, but our children or grandchildren will be the ones who shall reap these seeds."

"As for their second point of whether all EC members have to bail a weak member state out, I doubt it," she said. "Besides, by the time a single currency is implemented, such disparities would not be as severe as it is right now."

[Montecara]

"Mr. President, we thank the delegation of Katranjiev for reintroducing its proposed Act, and we are always quite glad to cosponsor legislation to further the fundamental goals of the Community. However, we feel that the Council as a body may be getting somewhat ahead of itself in this instance. The proposal of the delegation of Katranjiev has the following main points: one, the establishment of an exchange mechanism, and two, the establishment of a unit of account and attendant currency basket for internal EC purposes.

The second part of this proposal is, we feel, rather uncontroversial; it is simply a wise way for the EC to improve its internal finances by paying its Secretariat staff in a consistent and even-handed manner. Currently, each Institution's budget is made out in the local currency of the Member State where that Institution is headquartered. Thus, we have the Council staff being paid in Aininian louré, the Parliament and its staff in Francilian écu, the Court of Justice in Massean equino, the Court of Human Rights in Geadish guilders, and the Secretariat itself in Vyvlandic mynig. According to the proposal, this byzantine system would be replaced with a single unit of account, the value of which would be determined by the real value of the currencies in the Common Market. We wish to stress that it is not the other way around: the value of the Esquarian currency unit will not dictate the value of anything else, including any Member State's currency.

Regarding the first part of the proposal, the exchange rate mechanism, there is cause to be more circumspect. Many delegations here may be aware of the concept in economics known as the impossible trinity, the principle that a state may choose only two policies out of these three: free flow of capital, a sovereign monetary policy, and fixed exchange rates. Adopting a pegged exchange rate band for the whole Community would essentially commit every Member State to choosing between the free flow of capital and a sovereign monetary policy, and given that the free flow of capital is essentially a mandate of the Common Market as it is, the result would be that Member States would by necessity give up their sovereign monetary policies. That is a choice that the Community can make, but we should certainly not stumble into a situation in which we did not intend to find ourselves. Speaking on behalf of my own nation, the position of the Montecaran government and central bank has long been that maintaining our sovereign monetary policy is a matter of national strength and security and is therefore not negotiable at the present time. I am sure that other Member States feel the same way.

We therefore present the following amended proposal for the Council's consideration. Our colleagues will find that it retains the best features of the original proposal by the delegation of Katranjiev while eliminating some of the more untenable provisions, as we have described. We have the honor to present as follows: "

Esquarian Community Internal Account Act

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Preamble
The Esquarian Community,
Wishing to simplify internal accounting processes within the Esquarian Community;
Committed to reducing unnecessary expenditures and using its fiscal resources effectively;
Recognizing the value of enhanced cooperation in monetary affairs;
Therefore enacts as follows:

Esquarian Currency Basket

1. The Esquarian Currency Basket (ECB) is hereby established.
2. The ECB is defined as a basket of currencies of all nations in the Esquarian Common Market, with its value calculated as follows:
   
   1. Taking the average value of all currencies in the Common Market relative to the NSD to create the raw exchange rate;
   2. Calculating the proportion of each country's gross national product to the gross internal product of the entire Common Market;
   3. Assigning weights to the raw exchange rate based on the aforementioned proportion.
3. The ECB will be administered by the Esquarian Secretariat under the program of the Esquarian Common Market.

Esquarian Currency Unit

1. The Esquarian Currency Unit (ECU) is hereby established.
2. The ECU is defined as a unit of currency having the value of the rate of the ECB to the NSD.
3. The ECU will be used by the Esquarian Community as a unit of account.
4. The ECU will be adopted by all Institutions by no later than 1 January 2018.

[Lanos]

"We wish to sponsor the Montecaran proposal."

[Korizland]

"Begging your pardon, Ma'am, but our concern is not that they will trade with some one else, it's that they will simply stop trading at the volume they currently do. This mechanism could produce a permanent depressing effect on their economies which will drive them to conduct less trade. The stronger economies will make up the difference by increasing trade with countries outside the Community, thereby preserving their own economic strength while their products become further out of reach of those weakened economies, raising greater barriers to trade. Even if the stronger economies did not make up the difference with other countries, then their own economies will receded and when things do stabilize out at a new normal, it will be with a smaller overall economy within the Community.

"As such, I'm afraid we cannot support the proposal of the delegation from Katranjiev. We do agree, however, that improving the consistency of Secretariat financial organization will help increase efficiency for the Secretariat in the completion of their duties within the Community and therefore it is our pleasure to sponsor the Montecaran proposal."

[Katranjiev]

Kishisheva stated, "Mr. President, we would like to sponsor the proposal made by the Montecaran delegation, due to all the reasons that the Montecaran delegation has presented."

"We would like to withdraw our own proposal from consideration as well, so we may focus on the proposal tabled by the Montecaran delegation," she added.

[Luziyca]

Taras Pashkov felt impressed at the changes made by the delegation of Montecara to such a point that they have introduced a new bill.

"Mr. President, the Luziycan delegation would also like to sponsor the proposal tabled by Montecara," he declared.

[Ainin]

"So ordered. There shall be forty-eight hours' debate on the bill."

[Ainin]

"Order, the debate period has elapsed. We shall now enter a forty-eight hour voting period. The question is to approve the EC Internal Account Act as enumerated on the order paper. During the next 48 hours, no debate on any topic shall be entertained. Delegations are reminded that they may vote yea or nay, or register an abstention."

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NAY.

[Luziyca]

YEA.

[Katranjiev]

YEA.

[United Provinces of Atlantica]

Nay

[Lanos]

Edit: Abstain.

[Pavonistade]

Nay

[Montecara]

Yea

[The Greater Bohemian Union]

Yea

[Aucuria]

Abstain.

[FreYhill]

Nay

[Korizland]

Yea

[Luziyca]

"Mr. President," Taras Pashkov declared, "since the 48 hours of voting has concluded, I motion that we release the results of the vote, and if a majority of the nations voted in favor of the bill currently on the floor, to have it be considered by the Esquarian Parliament."

[Lanos]

The Lanosian ambassador spoke after the Luziycans did.

"Mr. President, I move to hold immediate discussions on the situation regarding Bohemia and its hostile neighbor Razaria. Also, as part of this discussion, I move to discuss the validity of the Bohemian referenda concerning the transformation of their governmental structure and the abdication of the Empress. I wish to bring to the Council's attention as to the timing of the abdication and the referenda process. I voice concern as to the timing as the vote, in my opinion, was held without allowing a reasonable time to allow for constructive discussions to be held by the electorate."

The Lanosian ambassador then turned to the Bohemian delegation.

"Mr. President, I am deeply concerned the members of the Esquarian Community could be dragged into a conflict by Razaria as a result of its overreaction to the Bohemian changes to its government. I also would like to bring this to the attention of the Council."

[FreYhill]

Walking into the Council of Esquarium moments before the Lanosian delegation spoke, Ambassador Mats Lundgren was excited that this was the first issue he dealt with for the Toksanese Commonwealth since his appointment as Ambassador to the EC.

"Mr President, the Toksanese Commonwealth seconds the concerns of the Lanosian delegation and calls for the Bohemian delegation to respond to their remarks."