The same applies to outstanding government debt. Thus, since the start of EMU, investors have been able without any difficulty to borrow and lend funds in euro, and to trade their euro securities on the secondary market. Looking ahead, it is likely that over time international investors will start to hold a greater proportion of their portfolios in euro-denominated assets than they held in the former national currencies. In other words, the role of the euro as an international currency is likely to be greater than that of the sum of its components. One reason why this may be the case is that the economy and the financial markets backing the euro are large relative to the world economy. In this regard, one of the key elements influencing the international use of the euro is the creation of a large, liquid and integrated capital market in the euro area. As for trade, the existence of a large capital market will also encourage and facilitate the use of the euro in international transactions. In particular, many euro area exporters and importers, who did not previously use their own domestic currency for invoicing, may now take the opportunity to do so with the euro. The same tendency could gain ground in those countries that have close economic ties with the euro area or which have chosen to peg their currencies to the euro. This brings me to some considerations on the use of the euro in the official sector.

Domestic policymakers have greater understanding of the local economic and financial conditions, with the necessary experience in dealing with countryspecific circumstances. In this regard, multilateral institutions must respect that individual countries, as independent institutions, have made the tough but necessary choices after careful and deliberate considerations. Multilateral institutions possess great breadth of cross-country information to dispense prescription for its member countries. But there is no such thing as a ‘one-pill-cures-all’ remedy. Instead, tailored policy responses are essential given the unique and diverse nature of emerging economies. As the world becomes increasingly more integrated and harmonised, we welcome the value of global coordination and interaction if it adds to the betterment of society at large. But where peculiarities exist, member institutions ought to be given the space to exercise their autonomy. We must also avoid the rush towards greater cross-country standardisation that impinge on policy flexibility or where policies are judged based on pre-subscribed narrow definitions, theories and concepts rather than the actual outcomes. The never-ending debate on the categorisation of policies as capital flow management measures or macro prudential policies is one such contention. In an increasingly integrated and complex environment, the impact of shocks varies between countries. The policy would also vary. Even if policies are similar, the outcomes might be different. The work of multilateral institutions becomes even more difficult and complex. For instance, any mis-categorisation of policy could prematurely reverse the effectiveness of that policy, given the impact it might have on investor perception and sentiment.