Aside from economic and operational efficiency, exercising political discretion is indispensable. At the same time, it is clear that growing international involvement restricts the room for manoeuvre. More recently, endeavours by the European Union to close loopholes by taxing interest earnings on capital invested in countries other than the tax domicile have gained attention. Under discussion is a choice between a withholding tax and a reporting obligation. At this juncture, a consensus within the EU is not yet foreseeable. Clearly, a convincing solution would have to include all major financial as well as off-shore centres. If that becomes possible, we would hardly be able to refuse to cooperate in the field of withholding tax. In the event of a comprehensive solution, the effects should be within acceptable limits from a general economic perspective. Finally, attention must be drawn to the organisational and technical infrastructure as an element of the general environment. In this respect, conditions in Switzerland are favourable. Technologically advanced and in some areas pioneering solutions guarantee quick, safe and cost-effective business transactions. This is of great value for the integrity, stability and quality of the financial centre even if the respective activities are largely hidden from the public eye. Apart from the relevant factors already mentioned, the development of financial transactions will be influenced to a considerable degree by changing customer needs and technological innovations. As regards customer needs, changes in savings and investment habits of private and institutional customers must be pointed out.

After what has been said, all will depend on whether the participating countries can muster the discipline indispensable for sustained and convergent stability-oriented policies. In the context of the run-up to monetary union, significant progress has been made in individual countries. Inflation has been brought under control. Budgets have been brought in line with lasting effect. Both achievements did not fail to have a positive impact on the development of interest rates. In view of the challenges that lie ahead, one must bear in mind that with the fixing of exchange rates, individual countries have forfeited an element of flexibility. In the past, imbalances in economic development were compensated with flexible exchange rates. Losing this possibility is significant, because many countries already lack the capacity to adjust. We note with satisfaction that the monetary concepts of the European Central Bank are largely in conformity with our own. The chances are thus good that this will result in a sustained convergence of stability-oriented policies and, as a consequence, basically stable exchange relations between Switzerland and the new European currency area. Should, however, difficulties arise when the present goals are implemented, we would have to expect some turbulence. This would be likely to result in an upward pressure on the Swiss franc. The National Bank would, of course, have the possibility of relaxing monetary policy to counteract such a trend. This might, however, conflict with our policy’s orientation towards stability. The basic considerations on monetary policy outlined here also apply if we look beyond the European environment.