mr ercel discusses the monetary policy of the european central bank opening speech by the governor of the central bank of the republic of turkey, mr gazi ercel, at the economic research foundation, istanbul. 18 / 12 / 98 european economic and monetary union ( emu ) will come to life at the beginning of next year. the european central bank ( ecb ) will commence operations, and the euro will become an official reserve currency. eleven of the 15 countries in the european monetary system will link their domestic currencies to the euro by january 1, 1999. they will stop issuing their own currencies three years later. there will no longer be independent domestic monetary and exchange rate policies. instead, monetary and exchange rate policies will reflect the needs of the euro region as a whole, as determined by the european central bank. this stage has obviously not been reached easily or quickly. this new institutional arrangement was the product of years of effort. first the philosophical groundwork had to be established, before the technical work could even begin. the final stages were only reached gradually. the european union was thoroughly thought out. under german initiative, with french support and british technical assistance, and contributions from all the others, the institutions were established which will be responsible for monetary and exchange rate policy decisions under the maastricht treaty and the stability and growth pact. countries have made heroic efforts to satisfy the maastricht convergence criteria. they have reduced their budget deficits, pushed down their inflation rates to less than 2 %, and brought their growth rates close to 3 %. favourable global economic conditions made it possible to create an environment suitable for the proper functioning of the system. meanwhile, the european monetary institute completed the necessary preparations for launching the ecb, and transferred its responsibilities to that bank at the beginning of july 1998. at its founding, there was a broad consensus that the ecb should be independent. there were continuing discussions about its main target, however, and even though this question seems to be resolved, sometimes it still appears on the agenda. the main point being discussed is that while price stability is specifically mentioned in the constitutional agreement as an objective of the ecb, the role of the growth and economic stability objectives is less clear. it is generally agreed that the primary task of central banks should be price stability, but some still argue that the price stability objective should not conflict but should cooperate with the growth and stability objectives. others insist that since the existence of price stability brings about high

to improve very substantially our handling of conduits and special vehicles. looking forward, some tentative policy implications can be identified from a financial stability perspective. first, we need to restore confidence as we have a paradox that there is a large number of high quality assets which investors are currently treating as if they were not creditworthy. now, it seems to me that the one important reason why we observe such a lack of confidence is because we do not have sufficient transparency. this is an area that we need to look at very carefully, to see which measures should be taken to improve transparency. let me remind you that after the asian crisis we drew that conclusion : the absence of sufficient transparency had driven a number of investors and market participants to consider that each particular issuer in asia was to be treated with great caution and fear, because they were not sure of the accuracy of the information and data which were displayed. the international community drew the conclusion that it was necessary to increase transparency in particular as regards monetary policy, fiscal policy and the level of reserve assets in these emerging markets. and it worked, in my opinion, pretty efficiently. so again, it is a lesson that we learnt in the past. i am now at your disposal for questions.