new emissions after september 2008. remarkably, new bonds have not only been issued in countries with traditionally large markets for covered bonds like spain, france or germany, but also in the netherlands, italy and portugal where covered bonds had so far played a limited role only. 9 the purchase programme also impacted on prices. between 2000 and 2007 spreads on 3 - 5 year german covered bonds over german government securities have fluctuated around 20 basis points. in early 2009 spreads peaked at over 140. the announcement of the covered bond program led to a first drop in spreads ( figure 7 ). with the implementation of the purchases, spreads have declined further. spreads between german covered bonds and covered bonds of other euro area countries, which have similarly increased over the course of the crisis, have equally come down recently. see the monthly reports on the eurosystem ’ s covered bond purchase program on the ecb ’ s website. figure 7 german covered bonds - spreads over bunds spreads in basis points. iboxx indices, euro denominated 6 july : purchases start 3 - 5 years 7 - 10 years source : thomson reuters. 3. 2. 7 may : covered bond purchase program announced thinking about a counterfactual while a general evaluation of specific central bank programs remains elusive given the complexity of the underlying dynamics, it might still be insightful to step back and think about a very general counterfactual scenario – namely what would have happened to the euro area economies without emu in place. such a scenario is not wide of the mark. the euro was introduced only ten years ago. before, the european community tried to ensure stable exchange rates via the exchange rate mechanism ( erm ). exchange rate stability was perceived an important element of the common market as it provides a reliable basis for the trade in goods and services between the different member states. erm had been haunted by repeated devaluations and exchange rate crises, the most notorious episode occurring in 1992 / 1993. in the absence of emu, the 2007 / 2008 financial crisis would have brought such a system under severe pressure, as doubts about the liquidity and solvency of specific banks would have combined with a drying up of funding in the interbank and foreign exchange markets, concerns about government budgets and doubts about the willingness to defend fixed exchange rates in particular if this meant raising official interest rates in the face of economic slowdown. the experience of denmark, an eu country that has opted out of the common currency, provides a glimpse on what

klaus liebscher : the integration of financial markets in the euro area speech by dr klaus liebscher, governor of the oesterreichische nationalbank, at the cems graduate conference 2000 “ the post merger syndrome - effects on relevant markets, industry sectors and competitors ”, held in vienna, on 13 october 2000 ( slightly abridged ). * * * ladies and gentlemen, financial markets are essential. they perform a very important role in the implementation of monetary policy decisions into the economy. well - functioning and efficient financial markets are crucial to the achievement of a smooth and homogeneous transmission of monetary policy impulses. the continued integration and deepening of financial markets is therefore also a significant issue for policymakers, and particularly for central bankers. over the past few years financial markets have become more and more global, as technological progress and stepped - up competition have supported the accelerating move towards greater integration of financial markets. the creation of emu an the single currency were undoubtedly another important milestone spurring many european countries to promote this drive for integration. … where do we stand in the integration process 21 months after the successful introduction of the euro? the euro has brought fundamental changes to the economic and financial environment of the euro area. acting as a catalyst, the single currency made a major contribution to competition and efficiency in financial markets across the euro area. the removal of exchange rate risk has both lowered transaction costs and enhanced price transparency. moreover, there is no doubt that the introduction of the euro has facilitated the establishment of more cross - border links between financial institutions and has fostered the internationalization of business on the financial markets further. in addition, we can see a well - functioning money and capital market supported by a sophisticated cross - border payment system. … let me now focus on the degree of development of the euro area ’ s key financial markets : the implementation of monetary policy in the euro area has proved highly efficient. the eurosystem has successfully introduced a market - oriented, modern and flexible operational framework. the money market has clearly benefited from this in its refinancing operations. short - term interest rates have totally converged and the money market within the euro area has become fully integrated. as a result, we have an efficient and liquid euro money market, and banks benefit from the conformity of market conditions. the euro money market has widely used daily reference indices for interest rates, notably eonia for overnight transactions and euribor for transactions with longer maturities. these euro area indices