firstly the euro, as i said before, has the full legacy of the most credible currencies in europe, taking into account the fact that the european monetary convergence process has been based upon a benchmarking principle. the euro is not starting from scratch but from the solid soil of currencies having proved their solidity over time like the franc, the dm, the guilder, and so forth ; i secondly, the policy which is pursued by the european central bank is a policy of stability, credibility, low inflation so that the euro will be an excellent store of value. this is called upon us by the treaty. it is clearly the will of the european people. only to give you an example of the support of the public opinion for a reliable euro : according to a french poll, 95 % of the population was in favour of a euro at least as solid, reliable and strong as our previous “ franc fort ” national currency ; i thirdly, the process of economic and financial globalisation, the trend of increase in international trade calls in the long run for increased demand worldwide for official reserves and for highly reliable monetary and financial instruments. this explains why the progressive internationalisation of the euro will, in my eyes, be totally non - confrontational but cooperative. the exchange rate relationships of the euro area vis - a - vis key global currencies as regards the exchange rate relationship vis - a - vis major currencies, i think the best for me would be to reiterate the position of the eurosystem which has been expressed by wim duisenberg in the name of the full body of the council of governors of the eurosystem : “ in the view of the governing council the major economic factor behind the short - term developments observed in the exchange markets is constituted by cyclical differences between the euro area and the united states, which are expected to diminish over the course of this year and thereafter. the euro is a currency firmly based on internal price stability and therefore has a clear potential for a stronger external value. ” to sum up we have two main messages to global investors and savers : firstly, we pursue a policy which is designed towards price stability and currency solidity in a steady medium and long - term perspective ; secondly, the euro has a significant potential for appreciation. in conclusion, let me stress the following : the international cooperation under the aegis, in particular, of the g7, has been very fruitful regarding

. currency crashes amplified the adverse effects as capital fled the region in a drove. the asian miracle went bust. the capital flows that had once fertilised the impressive growth eventually caused a capsize when the asian financial crisis hit us in 1997 – a lesson that we all still vividly remember. 4. the asian financial crisis gave us a much - needed wakeup call at a dear price. yet, looking back, the crisis also has its silver linings : the painful adjustments that followed prompted governments to strengthen economic fundamentals, enhance banking systems, deepen local bond markets, and build up foreign reserves to cope with potential external shocks. because of these developments, the region has been able to emerge from the recent global financial crisis relatively unscathed and is now one of the key driving forces supporting the global economic recovery. 5. but we cannot afford to be complacent, as we are now confronted with a new round of challenges in uncharted waters. the unprecedented monetary easing in the advanced economies has led to global excess liquidity. and with the robust recovery of the emerging bis central bankers ’ speeches markets, there are powerful push and pull factors driving investors to search for yields in developing economies including asia. from q3 2009 to q4 2010, the net capital inflows to emerging asia1 amounted to us $ 541 bn, the largest inflows in recent years. 6. the strong capital inflows and resultant abundant liquidity have led to exchange rate appreciation, fuelled credit growth and driven up asset prices in the region. with output gaps closing, inflationary pressures are accelerating in a number of asian economies. capital flows also complicate the macroeconomic policy responses. while exchange rate appreciation and monetary tightening could theoretically cool down the economy, in practice, they may attract even more speculative inflows to profit from interest rate arbitrage and currency appreciation. 7. so how should we cope with these challenges presented by the unprecedented scale of global excess liquidity? given the global nature of fund flows and the increasing interconnectedness of the global financial system, it is obvious that national policies alone are insufficient to tackle the challenges. we need greater international and regional cooperation to manage risks posed by volatile capital flows to global financial stability. i believe there are three main areas for cooperation. 8. first is enhancing the resilience of the global and regional financial systems through financial regulatory reforms. a large amount of work in this area is under way at the