economic policies “ as a matter of common concern ” and subject them to a multilateral procedure. practically, member states have designed institutions and mechanisms to promote appropriate co - ordination. we can now say that emu has in turn been beneficial to the european economic and financial integration as a whole. indeed, a coherent operational framework has been provided for the co - ordination of economic policies through close mutual surveillance ( under the responsibility of the “ euro group ” and the ecofin council ) and through the implementation of the stability and growth pact. moreover, the broad economic policy guidelines, discussed each year by the heads of states and governments, help monitor macroeconomic and structural developments in the member states. i would like to briefly recall why the stability and growth pact plays such an important role : • by supervising the fiscal policies of the euro area member states, the pact together with the broad economic policy guidelines contributes to ensuring an appropriate policy mix within the euro area. it is essential for conducting a meaningful monetary policy, to counterbalance the fact that europe does not have a significant federal budget. • by setting up a penalty system for excessive deficits, the pact also helps prevent well - managed economies from having to bear an unjustified risk premium which would be transferred from poorly managed economies to them through the channel of the single currency. as regards the second common criticism against emu, that is to say the lack of instruments to respond to asymmetric shocks, i would like to stress that the stability and growth pact helps countering this argument. indeed, by urging countries to aim at a fiscal position “ close to balance or in surplus ” in the medium term, the pact enables them to let fiscal deficits increase, if need be, providing that they do not exceed the 3 % reference value. in short, it allows them to create a fiscal buffer during normal economic periods, that can be drawn on to counter economic divergences or asymmetric shocks. the last set of criticisms focuses on presumed economic divergences between economies within the euro area. to answer this last objection, i would like to put forward a few ideas : • firstly, monetary union does not necessarily imply that, at any given point in time, all participating countries will have the same rate of inflation or growth, even though the creation of the euro was based on the successful completion of a convergence process. for example, inflation divergences across countries or regions may be accommodated in a monetary union as part of the process of convergence of

- tackling the challenges faced by accession countries on the road towards the adoption of the euro, - contributing to macroeconomic and exchange rate stability, - helping determine the appropriate level for the eventual irrevocable fixation of parities. this is to be accomplished in the best interest of the candidate countries themselves. thirdly, a sound and efficient banking and financial system is key. significant progress has been made over the past few years in rehabilitating the banking sector and encouraging structural reforms and foreign ownership. progress in corporate governance, the enhancement of the legal and supervisory frameworks that support the banking sector are also crucial. they are conducive to achieving the macroeconomic objectives of the accession countries. * * * to conclude, let me stress two words : rapidity and stability. rapidity is a key word. we have not much time to meditate, decide, implement. the structural reforms, that we are badly in need of, must be implemented as rapidly as possible if europe is to be up to its historical challenges. the chinese say “ it is later than you think ” has never been so true. in any case, history itself does not wait for us. and when i look back, over the last twenty years, it seems to me that an unfortunately well - founded criticism could be that we have constantly under - assessed the rapidity of the stream of history : the rapidity of the deterioration of the situation in the ussr, the rapidity of the collapse itself, the rapidity of the enlargement process, the depth, the strength and intensity of the “ desire of europe ”, which is spreading over in the countries in transition. second word : stability. economic and financial stability, in a period of excessive volatility and of wide boom - bust episode, financial and real stability appear to be a very precious asset. we have built a new world : technology has permitted instantaneous communication and incredibly powerful real - time computation. globalization has created new cultural, conceptual, commercial and financial links between all economies including previously centrally planned systems ; together technology and globalization are progressively driving us to a unified planet of universal rules and regulations, code of conduct and practices, market procedures and market instruments, accounting standards, etc. in this new world, phenomena which had traditionally a local or a national impact may be amplified and become dangerous at the global level : amplification of financial cycles, herd behaviour, global contagion. analysing the opportunities and the risks