euro, against less than 3 million in the previous decade. however, much needs to be done in the labour and product markets, especially in the services sector, to permanently increase productivity in the euro area. overall, it can easily be seen in europe that the countries which have implemented the most far reaching reforms have also performed better over the years. a similar comparison in other countries or areas of the world could help to clarify the responsibilities of the various policies in achieving sustainable growth. the last lesson that i would like to draw to your attention is that emu in europe is much more than a monetary union, it ’ s in fact a political union. the sharing of the same currency has implications for citizens that go beyond what we as economists are used to considering. it entails implicit contractual relations which have a direct impact on citizens ’ day - to - day decisions. furthermore, policy - making structures in the euro area have become much more intertwined not only in relation to monetary policy but also to budgetary policy. this issue would require much more time to discuss in detail and is not always fully understood, partly because the form that political union has taken in the euro area, and in the eu more generally, is quite unique, evolving over time in a way that does not correspond to other political unions around the world. to be sure, the issue has not been understood by those observers, in particular in the financial markets, who consider leaving the euro area a viable policy option. as barry eichengreen recently showed in a paper, the way the euro area has been constructed and developed means that any exit would entail not only economic but also political consequences so as to make it nearly impossible. 2 the fact that the united kingdom, sweden and denmark will enter the euro area only when their people agree to such a decision is further confirmation that emu is indeed a political union. the five lessons that i have mentioned help to explain why the euro has emerged as the second world currency in just about ten years. i will not provide you with the data illustrating these developments. they can be obtained from the regular ecb publication on the international role of the euro. 3 the developments of the last ten years provide us not only with lessons but also with issues that remain open and pose challenges to policy - makers. let me illustrate three. a first issue concerns the impact that a new international currency has on the functioning, and in particular the stability, of the international financial system. this is an issue on

lorenzo bini smaghi : the international role of the euro and its potential in latin america keynote speech by mr lorenzo bini smaghi, member of the executive board of the european central bank, at the conference “ the euro : global implications and relevance for latin america ”, sao paulo, 17 - 18 march 2008. * * * ladies and gentlemen, during our lunch i would like to share with you some brief reflections on the international dimension of europe ’ s economic and monetary union, or emu. the title of my presentation has an additional part : “ and its potential for latin america ”. i am not sure that i should be the one to assess the potential for the euro in latin america ; i should perhaps let a latin american audience decide for itself. as you know, the policy of the ecb is neither to encourage nor to discourage the use of the euro. what i would prefer to do today is to examine the main lessons that can be drawn from the ten years of experience with monetary union, lessons that may also be of interest for the rest of the world, in particular latin america. i will be very concise and selective, given the time constraints. i will thus focus on the main issues that i think deserve some attention and will inevitably leave aside important aspects that may be taken up later in the discussion. i will focus on five main lessons that i would draw from the first ten years of the euro and discuss a few issues that are currently being debated in europe and may be of relevance to latin america, in particular for its policy - makers. let me start with the lessons. the first lesson that can be drawn from the last ten years is the importance for an economy like the euro area of having its own monetary policy. this seems self - evident, but it is not always the case. we currently see around the world many important countries and economies that have actually chosen not to have their own monetary policy. consider for instance the case of china, other asian emerging markets, the gulf countries, or russia. by making the exchange rate the main target for their policies they have de facto given up their monetary policy and have imported monetary conditions prevailing in the country whose currency they are targeting, most often the united states. given that underlying economic conditions in the united states will surely be different from those prevailing in these other countries, the monetary conditions that the latter will import are unlikely to be the most conducive to sustainable growth. giving up the ability to conduct