Value-at-risk calculations have become a crucial element of the standard approach used by market participants to evaluate the risk inherent in their market activities and to set up exposure limits. Of course, central banks and financial institutions should continue to encourage the use of these instruments. But, in times of financial turmoil, the growing use of sophisticated risk management techniques by financial intermediaries might have the paradoxical effect of amplifying the initial shock, exhausting liquidity and contributing to contagion phenomena. Regardless of the intrinsic qualities of these risk management tools, we see that their growing use in the same fashion by all market participants may have produced pernicious effects. When market players rely on converging risk evaluations, they tend to take the same decisions at the same time, thus amplifying initial shock to prices and trading volumes. Financial techniques can also reinforce the links between the various market segments. A striking feature of recent developments on financial markets is the quick spreading of disryptions from one market segment to another, especially between equity and credit markets. For example, the short selling of equities is sometimes used to hedge credit risk. The underlying reasoning is that if there is a credit default, the value of the equity will decrease symmetrically, and an equity gain will compensate the lender for the credit loss. As a result, the fall in the equity value, which is triggered by the credit default, is amplified by the short selling operation.

Indeed, the EU Treaty calls, as a prerequisite for adopting the euro, for a high degree of sustainable convergence in the fields of price stability, government fiscal position, stability of the exchange rate, and long-term interest-rate levels. The sustainability of nominal convergence itself presumes that sufficient preliminary progress has been made towards real and structural convergence (and namely having set a fully-fledged market economy, catching-up in income and productivity levels, as well as economic and social infrastructures, upgrading of the legal system…). Conversely, a sustainable catching-up process requires macroeconomic stability. Therefore, nominal and real convergence should be pursued in parallel, and are not antagonistic. •  Secondly, I noted that several accession countries have already expressed their intention to join ERM II rapidly after EU entry. This intention is to be welcomed, although it should be clear that ERM II membership needs neither to happen immediately after EU accession in all cases, nor to be limited to only two years, which is the minimum before adopting the euro. It would be totally misleading to consider ERM II as a mere “waiting room” before the euro. On the very contrary, ERM II membership allows countries to retain some limited exchange rate flexibility during the catching-up process and offers a meaningful, flexible and credible framework for increasing nominal and real convergence with the euro area, and for helping determine the appropriate level for the eventual irrevocable fixation of parities, in the best interest of candidate countries themselves.