eu will have ten new member states and around 100 million new inhabitants, the vast majority from central and eastern europe. of these ten, nine have expressed their desire to join monetary union as soon as they meet the convergence criteria. contrary to many people ’ s expectations, several of these countries appear fully capable of meeting the criteria in the next few years. after a decade of reforms leading from planned economy to market economy, inflation and budget deficits have been cut and debt levels have been kept in check in a number of the smaller countries, while for the bigger countries, such as poland, hungary and the czech republic, budget consolidation is their last remaining obstacle. so it is not unrealistic that a handful of new countries could introduce the euro as early as 2006 - 2007, or in any case 2 - 3 years later. it may be that sweden, denmark and the uk will have to discuss their future relationship to the euro at the same time as the euro area expands to include half a dozen new countries. the central and eastern european countries will also have to weigh the long - term gains of adopting the euro against the risks of asymmetric shocks. the advantages for these countries are perhaps even clearer than for sweden. particularly substantial gains may arise from increased financial integration through the euro. thanks to the fact that banks from eu countries have acquired large sections of the banking system in eastern europe, the financial sector there has been able to evolve relatively quickly. but the new member states ’ financial systems are still rather undeveloped, with credits in relation to gdp of between one - eighth and one - quarter of that in the euro area. sweden ’ s baltic neighbour estonia is one example of how currency integration can help the financial system to evolve. the estonians have pegged their currency to the euro for over a decade and are keen to quickly take the step into monetary union. their banking system is owned by swedish - nordic banks and credit volumes are growing by 20 - 30 per cent a year - most of which is denominated in euro. in some countries, the euro can also help to cement the macroeconomic discipline that is still a relatively new phenomenon there. meanwhile, the risks that stem from the countries possibly diverging from the euro area average are perhaps also clearer than for sweden ( which is a country that is unusually well - integrated with euro area countries and has a similar economic structure ). but some factors suggest that the new member states in central europe do not need a different monetary policy than that of

they at their very best slow down the build - up of stability risks within the financial system. this has several important policy implications. for one, despite of the limitations i sketched, we should remain committed to full implementation of the international reform agenda. limitations in scope and impact cannot be an argument to deregulate. but on top of this, we should continue to work on structural challenges within the economy and its financial system. importantly, we should also continue to think about the implications for the overall macroeconomic policy mix. the observation that macroprudential policies cannot be fully relied upon to contain systemic risks would also have to be taken into account in the conduct of monetary and fiscal policy. to be clear : it should not have an impact on the mandate or direction of monetary policy, which would continue to be fully geared towards price stability. however, financial stability would have to be a relevant factor to take into account within the design and the proportionality of policy measures. obviously, these are complex observations that require further analysis. i look forward to discuss these and related matters in our quest for further operationalization of effective macroprudential policies.