erkki liikanen : the tenth anniversary of the euro – a time to reflect speech by mr erkki liikanen, governor of the bank of finland, at the professor ragnar nurkse seminars, bank of estonia, tallin, 10 september 2008. * * * it was only ten years ago, in may 1998, when european leaders decided to launch the third stage of economic and monetary union. the european central bank was founded a month later, in june 1988. under the maastricht treaty, the new monetary institution was granted full independence to conduct monetary policy, with price stability as its primary objective. the task of defining price stability was given to the governing council of the ecb, in which the governor of the bank of finland was, and is, a member. at the same time, an informal discussion forum, the euro group, was created by the ministers of finance and economic affairs in the euro area countries to discuss issues related to emu, such as the economic situation, coordination of economic policies, structural reforms, enlargement of the euro area and the external representation of emu. introduction of the common currency and common monetary policy had been preceded by four years of very intensive legal, regulatory and logistical preparations. it was necessary that the infrastructure for the common monetary policy was fully operational from the first day. these preparations had remained largely unnoticed by the public at large. the creation of economic and monetary union was also preceded by a great number of sceptical remarks from many commentators, including academic economists. many experts in international macroeconomics doubted that a single monetary policy could suit countries whose economies diverged in many respects. the second major milestone, and the biggest one for euro area citizens, was january 2002, when the changeover from national notes and coins to euro notes and coins took place in 12 eu member states. the euro area has since expanded by a further three countries, and, at the beginning of next year, the area will welcome another new member. three months ago, in june, we had the tenth anniversary of the european central bank. the coming new year will mark the tenth anniversary of the common currency, the euro. today everybody, including the vocal critics, agree that emu and the euro have been a great success. but there is no doubt that many important challenges still remain. in the rest of my talk, i will reflect on the successes and challenges of emu from both a european and a finnish perspective. european perspective monetary

macroeconomic performance has been favourable proves only that participation in emu has not been harmful to finland. it does not prove that participation has contributed to this favourable performance. the fact that sweden's macroeconomic performance has been favourable proves only that sweden has not suffered from non - participation in emu. but it does not prove that the nonparticipation has contributed to this favourable performance. the popularity of monetary union was not particularly high in finland on the eve of emu. according to a eurobarometer survey conducted in autumn 1997, only one third of finnish citizens supported the idea that emu with one single currency would be “ a good thing ”. finland was clearly an emu - sceptic country at that time, together with the uk, denmark and sweden. moreover, the support of finnish citizens for membership of the eu was surprisingly low in 1997. less than 40 % regarded membership as “ a good thing ”. the swedes were equally sceptical, while the danes were much more favourable, with 55 % of citizens regarding membership of the eu as “ a good thing ”. by 2005, finns ’ support for the eu was still low, but support for emu had surged and was the fourth highest in the eu with a score of 80 %. swedish perceptions had changed much less, but still favourably. the final question then is : what explains the favourable macroeconomic performance of finland and sweden? the answer might be : both countries have sound public finances. inflation expectations have been well anchored in both countries ( at least until recently ). both have comparatively flexible product and labour markets. both countries are open economies and they are in favour of free trade. to put this briefly : both countries have had modern economic policies. popularity of eu and the euro the eu is a good thing finns have remained sceptical on the eu the euro is a good thing the finns were eurosceptical in 1997, but now are one of the most pro - euro in europe! suomen pankki | finlands bank | bank of finland conclusions : nurkse would not disagree ragnar nurkse had great experience of a broad range of economic issues such as monetary instability and financial disorder as well as trade wars and competitive devaluations – and, finally, of macroeconomic and political instability culminating in military conflicts and ultimately war. nurkse was more than an observer ; he was a top - ranking scholar in international monetary economics. he was