of the growth differential. • narrowing of the “ restructuring differential ” between the united states and the euro area economies. it seems to us that although corporate restructuring in europe was lagging behind the united states a few years ago, we are now observing a catching - up process. this leads me to my last point : the undertaking ( and speeding up ) of structural reforms is a major condition for the euro to be a complete success. 4. the conditions for the complete success of the euro : sound macroeconomic policies and structural reforms in this regard, the lisbon european council meeting last month can be viewed as a further important step towards the necessary medium - term strategy for structural reforms in the union. the labour market has become much more flexible in the past few years in europe. while europe has long had a strong tradition of economic regulation, it must be acknowledged that deregulation is well underway in most countries. the change is particularly noticeable in several key sectors such as telecommunications ( mobile phones, long distance calls ), transportation ( particularly airlines ) and the power - supply industry ( electricity and gas ) to mention only a few. major countries have embarked upon an ambitious overhaul of their public sectors. in countries with a large public sector, such as italy or france, ambitious privatisation programmes have steadily reduced the number of state enterprises. in addition to privatisation, state enterprises are changing ; companies that remain government - owned are becoming more profit - minded ( particularly airlines, railways, etc ). tax reforms should accompany the reduction of fiscal deficits within the framework of the stability and growth pact. they have already been initiated in several key countries, especially germany and france. european firms are restructuring and becoming more internationally competitive. european firms are going through a deep restructuring process. mergers and acquisitions have hit new records as companies seek to create national, regional or global champions ( m & as close to usd 1, 500 billion in 1999 compared with usd 500 billion in 1997 ). venture capital and start - ups are booming as investors and entrepreneurs become more convinced that europe can compete with america in knowledge - based industries. heavy industries and large conglomerates are restructuring as never before. finally, new rules on corporate governance are spreading. the outflows of foreign direct investment merely mirror the dynamism of european firms. european firms were lagging behind us firms in terms of foreign direct investment and they are now catching up. european firms have entered a “ globalisation process ” whereby they aim to reach a global size through

start of 1999, it enabled credit institutions to effect large - value, crossborder transactions with same - day value all day long, thus allowing the interbank market to function as a single market right away. the integration and efficiency of the euro money market is measurable through various indicators such as : – high trading volumes ( around billion per day in the overnight interbank market ) ; – virtually non - existent quotation differentials between financial centres ; – a high proportion of cross - border transactions, be it on the “ unsecured ” deposit market, the repo markets or the interest - rate swap market ; – minimal recourse to the eurosystem ’ s standing facilities ( which means that liquidity adjustments are mostly made on the market ). • rapid growth of the euro - denominated bond markets while full integration has clearly been achieved on the money market, obstacles still remain on the bond market, partly reflecting differences in tax regimes and in market organisation and practices, although a good deal of harmonisation has already taken place. however, issuers have rapidly shown great interest in the euro as illustrated by the fact that issuance in euros exceeded issuance in dollars in 1999. the important point to highlight on this subject is not so much that the level of issuance in euros surpassed the amount in dollars, but that the new - born euro bond market has been able to absorb such an increased volume without any disruption. the euro is already a technical and operational success. i will now try to demonstrate that the euro has the potential to also be a complete strategic success in the future. b. the euro has the potential to also be a complete strategic success in the future 1. the euro has the potential to become a major reserve currency as an alternative to the us dollar the euro is already the second most widely - used international currency in the global monetary and financial system. but, 18 months after the introduction of the single currency, it is fair to say that while the euro has become the first financing / issuing currency in the world, it has not so far made the same progress as a reserve / investment currency. the low level of interest rates in continental europe has fostered the international financing role of the euro ( euro - denominated bonds accounted for some 45 % of new issues in 1999 which, as i mentioned earlier, somewhat exceeds the market share of new usd - denominated bonds ). conversely, these relatively low remuneration rates have reduced the role of the