the so - called convergence criteria which concerned inflation rates, budget deficits, government debt ratios, exchange rates and interest rates. member states were expected to make further efforts so as to ensure a smooth transition to stage three. for example, they had to amend national laws so as to make them compatible with the treaty and to make their ncbs fully independent before the start of stage three. in 1995, three new member states - austria, finland and sweden - joined the european union. finally, on 1 january 1999, the european union reached a new and unprecedented stage of economic integration. with the launch of the euro, 11 countries gave up their monetary sovereignty and transferred the task of conducting the single monetary policy to a supranational institution. this historic step marked the culmination of a long period of successful preparatory work, the magnitude of which can hardly be overestimated. as a result of these efforts, the introduction of the euro took place in an environment of price stability that only a few observers would have predicted some years ago. the start of monetary union proved to be a formidable undertaking. in spite of huge operational challenges, the changeover took place without any incidents affecting the orderly functioning of the monetary system, not least as a result of the successful preparatory work of the emi and, since mid - 1998, the eurosystem. the introduction of the euro had important implications for the international capital markets. this was due to the fact that a number of the currencies replaced by the euro had played an important international role in the past. it also holds true because the euro has become the currency of an economic area which roughly equals the united states in terms of economic size and external trade, and which has the world ’ s second largest capital market. first experience gained with the euro let me describe the first experience gained with the euro from the ecb ’ s point of view. the eurosystem ’ s monetary policy strategy provides financial markets and the public with an important framework on the basis of which monetary policy decisions can be explained in a consistent and predictable manner. in our view, the monetary policy strategy has passed its first tests successfully. at the core of the strategy is a clear primary objective for price stability. a clear definition for the overriding objective of maintaining price stability in the euro area contributes to stabilising market expectations. the eurosystem defines price stability as a year - on - year increase of below 2 % in the harmonised index of consumer prices ( hi

euro. according to available data for september, the system now processes approximately 3. 5 million domestic and cross - border payments, which have a total value of about eur 20 trillion, per month. moreover, cross - border payments represent 40 % of the value of all target payments. the long future of the euro let me now try to look ahead towards the “ long future of the euro ” and the challenges which the ecb and the eurosystem will have to address. the experience with the short past of the euro justifies expectations that we will gradually see further advances towards a broadening of economic and monetary integration in the future. with the establishment of the eurosystem, solid foundations for a stable currency were laid. maintaining price stability in the euro area helps to gain credibility and the confidence of european citizens in the stability of the euro. this will also contribute to the increased use of the euro outside the euro area. expectations of a long future for the euro seem warranted in light of the increasing confidence of european citizens and international investors in the single currency. the international interest in the euro is indeed evident, for example, from international new bond issues. according to information from the bank for international settlements, the volume of new issues in euro almost doubled in gross terms in the first half of 1999, compared with the same period last year. an important challenge for both monetary policy and economic policies is to maintain noninflationary growth in the euro area. in the forthcoming years - i am confident - we will see that the current recovery has extended to become a period of price stability contributing to prolonged employment and output growth. however, there are important conditions to be met to achieve a substantial and sustained increase in output growth and lower unemployment. first of all, decisive measures to address the structural problems in europe, in particular in the area of labour markets, are needed. second, the consolidation of public finances, which has made considerable progress in the past few years, has to be continued and, where necessary, strengthened. sound fiscal policies make monetary policy ’ s task of maintaining price stability easier. in this context, the stability and growth pact is a crucial element. its aim is to encourage the pursuit of disciplined and sustainable fiscal policies by both the participating eu member states and prospective members. in so doing, it can contribute significantly to the establishment of favourable conditions for sustained economic growth and high employment in the medium term. in the coming years, the success of emu demands that the clear distribution