klaus liebscher : the changing landscape of fdi in europe opening remarks by dr klaus liebscher, governor of the austrian national bank, at the ceei 2006 “ the changing landscape of fdi in europe ”, vienna, 20 november 2006. * * * ladies and gentlemen! it is a great pleasure for me to welcome you all to vienna and to our annual conference on european economic integration ( ceei ). looking at the list of participants, i am glad that we have once more attracted a sizeable number of key experts from national and international institutions, academia and the private sector – both among our distinguished speakers and in the audience. in the past, it has proven very fruitful to organize this conference in cooperation with other institutions. i am especially happy that this year we have been able to win the european bank for reconstruction and development ( ebrd ) as a partner again. the ebrd is an institution with a long - standing tradition in supporting investment projects in central and eastern europe. for this reason the ebrd is an ideal partner in our attempt to cover the interesting topic of this year ’ s conference : “ the changing landscape of fdi in europe. ” thus, it is a special pleasure for me to welcome among us mr. schepers, vice president of the ebrd, who is also going to share some opening remarks with us in a few minutes. let me at this point extend a special welcome also to several other distinguished speakers of the first conference day : eu commissioner laszlo kovacs, the vice - president of the european investment bank ivan pilip, robert lipsey, director at the national bureau of economic research, who will deliver the first keynote lecture and ecb executive board member jurgen stark, who will give the dinner speech this evening. a very warm welcome to all of you and many thanks for your participation. i ask for your understanding that it is impossible at this point to list all other distinguished experts who will contribute to this conference with their views and expertise, but i am very much looking forward to all of your interesting presentations and many stimulating discussions. so let me thank all speakers for their contributions and the staff of the oesterreichische nationalbank and the ebrd for making this event possible. as in recent years, the conference on european economic integration of the oesterreichische nationalbank once more covers a topic that ranks high on the policy agenda. at first sight, foreign direct investment may appear to

the exchange rate channel of monetary policy transmission is less important for a large, relatively closed currency area, like the euro area, than for small open economies. however, as statistics show, the euro area is still more open than the united states. in 2000, exports of goods and services represented 19, 1 %, whereas imports represented 18, 7 % of the euro area ’ s gdp. this is more than the united states with a ratio of 10, 7 % for exports and 14, 4 % for imports. in such an environment, only a stability oriented and credible economic policy can contribute to sustainable and economically viable exchange rates. of course, exchange rate developments cannot be ignored – the second pillar of the monetary policy strategy of the eurosystem also contains information from the foreign exchange markets. long - lasting and identifiable deviations from estimated “ equilibrium ” exchange rates can have very negative consequences for an economy such as a massive misallocation of resources. but so far, regrettably, there is no clear consensus in the economic literature on how to calculate equilibrium exchange rates. given this and the general observation that we still move within the framework of what has happened over the past 30 years, the importance of the external exchange rate stability is somewhat overstated. it has also to be emphasised that the tragic events of september, 11 did not inject any turbulence into currency markets but the euro / dollar exchange rate continued to trade around its previous level. hence, even though it may be too soon to make a firm statement but the very existence of the euro as well as the actions taken by the eurosystem in conjunction with the federal reserve system are likely to have stabilised markets. price stability second, as to price stability, most analysts agree that the monetary policy decisions of the ecb governing council have been appropriate. since the beginning of emu, the euro - area has achieved low inflation and expectations thereof and thus interest rates have been low. the governing council has made its decisions on the basis of its primary goal, price stability. it is worthwhile to restate the mandate of the eurosystem. the primary objective of the eurosystem, as the treaty of the european union defines it, is to maintain price stability in the euro area. the governing council of the ecb has defined price stability as " year - on - year increases in the hicp for the euro area of below 2 % ". furthermore, it was made clear from the outset that price stability should be maintained