to perform its tasks right from the start of stage three in january 1999 ; moreover, the emi is often consulted by other european authorities, who pay careful attention to the advice it provides ; this was notably the case for the changeover scenario adopted by the heads of state and of government in madrid in december 1995, and for the elaboration of draft regulations concerning the legal framework for the use of the euro. here again, france and germany are playing a very active role in these preparations, and as early as tomorrow i will meet president tietmeyer in frankfurt, together with our colleagues, to attend the monthly emi council meeting. franco - german monetary cooperation will ultimately be crowned by the creation of a european monetary union in 1999 i am personally convinced that the creation of monetary union in 1999 is the logical consequence of economic, monetary and financial developments that have been taking place during the past years. the increasing integration of the european economies - and in particular those of france and germany - called for a single monetary policy and a single currency. i am also convinced that monetary union will successfully go through, right from 1999 since : - it is a credible process ; - it will create an environment of stability. emu is a credible process indeed, the case for a european monetary union is based on solid economic grounds, and it will be implemented in a realistic way. emu is not just some abstract concept dreamed up by a few people. it is based on solid economic grounds. when the exchange rate stability provided by the bretton woods system and by the barriers between national financial markets disappeared in the 1970s, a number of european governments became progressively convinced of the need for a single currency. the maastricht treaty is indeed the result of past major initiatives, such as the werner report in 1970 and the delors report in 1989. the removal of all tariff and non - tariff barriers to trade has made europe the largest market in the world. the eu accounts for 21 % of total world trade, against 17 % for the us and 10 % for japan. the benefits of the sheer size of the single market are plain to see. the allocation of savings and investments is more efficient, competition is stronger, and the greater liquidity of financial markets makes more capital available at lower cost to finance profitable ventures. no doubt the european monetary system and its exchange rate mechanism have helped curb exchange rate instability and eradicate the inflation culture that prevailed in some countries ; yet the current level of economic and business integration calls for the

to me it is obvious that the process of european integration has reached a crossroads where the future form and degree of european cooperation are up for decision. the current debt crisis heralds a new era for the european economic and political architecture. the difficulties are hard to overcome but certainly also imply enormous potential. the strong interdependence of markets within the euro area facilitates financial contagion and spillovers. to safeguard the financial and macroeconomic stability of the euro area the problems of individual countries have to be tackled by common supranational political and economic initiatives. an important lesson to be learned from recent developments is that a currency union in the end also amounts to some form of political union. this understanding has led to a revision of the european economic governance framework. stricter rules and the more immediate threats of financial sanctions were formulated to prevent unsustainable public finances and macroeconomic imbalances in the future. while such rules have the ability to give guidance and to deliver benchmarks, it will never be possible to force countries to fully comply with them as long as the countries involved are sovereign nations. in the end, what it all boils down to is that a political union needs more than a tight set of rules and restrictions, namely central decisions - making in fiscal policy, or, at least a strong say for community institutions in recipient countries ’ budget policies. the developments over the past two or three years indicate that even in the face of a severe sovereign debt crisis with potentially devastating consequences for the euro area as a whole, the time is not ( yet? ) ripe for such a far - reaching change in governance and sovereignty. let me in this context also briefly touch on the often raised call for “ solidarity. ” in the context of the eu debt crisis, for most people the picture that comes to mind is “ rich ” european countries paying for transfers to the troubled “ poor ” countries. however, this is only one side of the coin. solidarity also implies the willingness of the recipients of transfers to take maximum effort to improve their own financial situation. whatever decisions governments make, it is vital that the majority of voters ultimately support these decisions. this applies both to recipient and to creditor countries. rescue packages or intergovernmental transfers that do not have public support certainly lead to unsustainable political developments, which in turn have the potential to trigger a new confidence crisis. the potential of the current crisis lies in the momentum for change. the crisis could be used to