Many countries to day, especially in Asia, are confronted with the same challenges we faced, in Europe, fifteen years ago: first, is it possible to reconcile greater economic integration with exchange rate volatility? And, if not, can fixed or pegged exchange rates regimes be sustained in an environment of full capital mobility? Taken together, these two questions led European countries to forgo monetary autonomy. Is this always advisable? This is a very difficult question. My own answer would be to progress towards closer monetary cooperation with determination and caution. A strong degree of political determination is necessary because, clearly, full monetary autonomy becomes more and more problematic when economic integration has reached a certain stage. With greater economic openness, it is no longer an option, for small and medium size economies, to be indifferent to their exchange rates. On the other hand, independent management of their exchange rates by countries with close trade and investment links can lead to undesirable outcomes. Thus, cooperation is warranted. Monetary union, however, is a demanding endeavor. I have alluded earlier to the theory of optimum currency areas. While it is debatable in some of its details and developments, the main message is clear: the exchange rate remains an essential adjustment tool whenever economies are faced with asymmetric shocks and markets are insufficiently flexible to absorb them internally. This is still the case in many regions of the world where regional economic integration moves at a rapid pace, but between countries whose economic structures and specialization are very different.

Christian Noyer: From Maastricht to the present and beyond Speech by Mr Christian Noyer, Governor of the Bank of France, at the GIC / Drexel Spring 2007 Conference, Philadelphia, 16 April 2007. *  *  *  We have just passed the European Union 50th anniversary. It is a good time to reflect upon the essence and future of this extraordinary endeavor. Never before, in the whole history of mankind, have democratic nations pursued and reached, through peaceful cooperation, such a close degree of interdependence, involving, in many crucial areas, deliberate pooling of sovereignty. Of course, the process has not been without difficulties and tensions, many of which are still apparent and acute. Of course, numerous challenges remain and the future is paved with roadblocks which could still derail the whole project. But, for the first time in more than a thousand years, Europe is at peace and prosperous, with democratic regimes everywhere. This is, by historical standards, an exceptional achievement. At the start, EU was built on a strong intuition: by sharing the instruments and policies underpinning economic prosperity, European nations would create an irreversible situation of interdependence and solidarity where conflicts and wars of the past would become impossible. This intuition led to the creation of the European Coal and Steel Community in 1951, then, a few years later, to the European Community. Thus in 1957 the signature of Treaty of Rome was the starting point of this unique experience of regional integration in modern History.