the case of germany the appreciation of the euro means a considerable loss of price competitiveness since october 2000, based on long - term averages the implications for the country ’ s competitive position should be largely considered neutral. the cost advantages enjoyed by german suppliers within the euro area provide a certain counterbalance to movements in the dollar exchange rate. of course, just as much attention should be paid to imports as to exports. after all, imports of goods and services account for almost one - third of gdp in germany. in contrast to exports, german imports of goods rose in seasonally adjusted terms in the fourth quarter of last year compared with the third quarter. the increase was particularly pronounced in the case of imports from china, which now account for about 5 % of germany ’ s total imports. in addition, significantly more goods were imported from the emerging economies in south - east - asia and from the central and east european transition countries than in the reference period. owing to the appreciation of the euro, most of these countries improved their competitiveness over euro - area suppliers. by contrast, imports from other euro - area countries increased more moderately. overall, the economic outlook for 2004 is encouraging. from october through december, for example, the orders received by industry picked up markedly, and in the case of foreign demand the positive trend which had set in during the third quarter continued. in the final quarter of 2003, orders as a whole exceeded the third - quarter level by a seasonally adjusted 3. 8 %. the fact that the business climate in the manufacturing sector also improved further at the beginning of the year is consistent with this picture. according to the imf forecast, the growth of global gdp in 2004, estimated more than 4 %, will be stronger than at any time since the boom year of 2000. the oecd forecast estimates that in 2004 world trade will increase by just under 8 % compared with 4 % in 2003. despite the strengthening of the euro in the past few months, there is a good chance that the german economy will continue to benefit considerably from this world economic trend. the strong impetus expected from the external sector will probably also boost investment in germany. the substantial adjustments achieved by domestic firms in the past few years are also important in this connection. other encouraging factors are that the cost of debt financing has been low for some time and equity prices are picking up significantly. it is not yet clear to what extent exchange rate volatility will affect german propensity to invest. price developments in

in competition with other currencies only if it can be kept stable over the long term. the relevant institutional requirements have been met : the ecb is an independent central bank which is primarily committed to the objective of price stability. the euro ’ s greatest success to date has been as an issue currency on the international financial markets. between january 1999, the start of emu, and march 2000, 47 % of the net issuance in international debt securities was denominated in euro, compared with a dollar ratio of 45 %. it seems that the large issuers took advantage of the low euro interest rates in order to raise large amounts of funds in euro. however, it is also apparent that the euro ’ s success in terms of new issues increased its share of all international debt securities outstanding only slightly compared with its predecessor currencies, namely from 25 % at the end of 1997 to 30 % at the end of march 2000. at this reference date, the share of the dollar stood at 47 %. the euro ’ s share of international banking business is somewhat smaller than on international securities markets, amounting to 28 % in the case of bank assets and 24 % in the case of bank liabilities, compared with a dollar market share of 40 % and 42 %, respectively. relative to the share that the euro ’ s predecessor currencies had previously, the euro comes off much better in international banking business. 4 from the perspective of a central bank, it would be especially interesting to know the euro ’ s share of the official foreign exchange reserves. it is precisely as a reserve currency that the dollar has traditionally had the largest lead over all other currencies, with a recent share of more than 60 %. unfortunately, the corresponding share of the euro cannot currently be quantified reliably, since the underlying database is decidedly incomplete. the euro has developed very quickly into an - at least numerically - important international anchor currency. the ecb has recently listed some 50 countries in whose currency regime the euro is playing a role. the arrangements stretch from d - mark or euro - based currency boards ( bosnia - herzegovina, bulgaria, estonia ) and mutual agreements as part of erm ii ( denmark, greece ) to rather informal exchange rate links, which are geared to baskets that, in addition to the euro, include other currencies, too. two results of my empirical analysis merit particular attention. firstly, the dollar continues to be the leading international currency in virtually all functions