existing peg to the deutsche mark or the french franc, as for instance in the countries of the western and central african monetary union. in other cases, especially in the balkans, the euro has been unilaterally adopted as legal tender. overall, the euro has become the monetary anchor for about 50 countries all around the world. ladies and gentlemen! having outlined this general institutional framework, let me now turn to some more specific issues and challenges that accession countries face on their way to euro. although a lot has been achieved, accession countries will still need to further advance the process of bringing down inflation rates, while not delaying the much needed relative price adjustments within the economy. such price adjustments are part of the transition process and of structural real convergence and will typically entail inflation rates that may, for some time, range above those prevailing in the euro area. hence, accession countries are well advised to properly sequence the disinflation path toward the maastricht criteria and in some cases delayed entry into the euro area could be an optimal policy choice. the objectives of nominal and real convergence should be pursued in parallel. progress in nominal and real convergence will imply an orderly closing of the gap between the accession countries and the euro area economy, both in terms of per capita income and price levels. in order to reinforce each other, nominal and real convergence paths must be properly sequenced and mutually balanced. a fast - track move toward full nominal convergence and, in particular, toward complete monetary convergence could prove counterproductive in the pre - accession period. an important element of structural real convergence is further development of financial services structures, which were practically non - existent when transition started a decade ago. the main tasks are bank privatization, the development of a sound credit culture and the transformation of banks into efficient and competitive financial intermediaries. the three pillars of a functioning banking system are high - quality corporate governance of banks, market discipline in accordance with best - practice standards and efficient banking supervision. especially in transition economies, it makes sense to locate banking supervision with the central banks, at least for the time being, as central banks have the necessary funds to perform this task, have established their reputations and are already concerned with systemic risk issues. the strict implementation of eu treaty obligations, in particular those concerning the independent status of central banks, will be of fundamental importance. institutional, personal and financial independence are constitutive elements of central bank independence which are not an end in themselves but are instrumental in

, however, is that emu is a harbinger of political union within europe - as history shows, national territories and currency areas are, as a rule, identical. for this reason it is fundamentally important that national interests be overcome in favor of a single european policy and that the member states step up their cooperation on a common foreign and security policy as well as an internal security policy. i therefore welcome the eu's special constitutional convention. the assembled politicians and officials have the task of proposing a concept for the eu which will match our continental dimension and the requirements of the 21st century. i acknowledge that this convention is a bold experiment in consultative democracy. however, we need to define what kind of institutional arrangements will be prerequisite to meet our aspirations, what kind of society and what kind of economy we want to build. i also do not think that the real question is about federalism versus national sovereignty. the eu is federal already. it divides power between different levels of authority. the questions now are about the most effective and legitimate way to divide that power, so that national sovereignty is preserved within an integrated system. if these questions can be resolved, europe will earn the voice it seeks on the world stage. this, however, does not mean that we have to give up our national identities. their roots go very deep, and it is absolutely in the european union's best interest to preserve specific national and regional cultural traits. " unity through diversity " is certainly an advantage europe has compared to other regions and economic areas. i am therefore confident that - if we succeed in tapping the creative and problem - solving potential of europe's diversity to work on reaching common goals - europe and its countries face a bright future. ladies and gentlemen, after having emu implemented successfully, the current major challenge which europe faces is certainly the enlargement of european union. this integration project is just as impressive and farsighted as emu, and it also holds out enormous opportunities - as well as challenges that must not be underestimated. the process of integration has given western europe a period of political and economic stability not known before in its history. i am therefore deeply convinced that the enlargement of the union will be to the advantage of all countries on the continent, especially austria, and will be regarded as a great step in the history of europe in the years to come. accession negotiations began in 1998 and are now being conducted with a total of 12 candidate countries. the progress of the