THE IMPACT of the European Monetary Union (EMU) has already hit. On Jan. 1, 11 of the 15 countries in the European Union will scrap their central banks, accepting a single central bank maintaining their separate currencies as one.

The stunning announcement that the Frankfurt and London exchanges will start work immediately to create a common stock market follows on the heels of a raft of business mergers across national boundaries. The two exchanges plan to achieve easy access with harmonized market rules, accounting standards and technology.

The impetus came from London. Although Britain is staying away from EMU at first and its common currency, the euro, the massive financial services community in London cannot wait. London institutions need to be in on the ground floor to maintain their global position, even if British political institutions are not.

Technology is driving consolidation of markets. Given the rivalry of London and Frankfurt, which will be the financial services capital of Euroland until Britain joins, this alliance is not assured. Some European stock exchange alliances have been announced only to founder. This one could, too. As it stands, however, the Paris Bourse and other exchanges are excluded.

As the major companies of Euroland become more important, so will the exchange where their stocks are traded. An exchange that may someday rival the New York Stock Exchange is being designed. It may well materialize.

Globalization is not a political ideal. It is an economic creation. The London and Frankfurt stock exchanges are a little ahead of others in trying to deal with it.

Pub Date: 7/20/98