the political axis and the european central bank ’ s “ institutional loneliness ” all too often, and quite unfairly, make the ecb an escape goat for everything that is going wrong in europe. after all, the examples of germany yesterday or the united states today just go to show that you can have a strong political power and a strong central bank at one and the same time. iv. is heterogeneity a cause for concern? in reality, the question of heterogeneity comes up in the case of any monetary policy, even national policy, applying to a more or less disparate set of regions, and all the more so, of course, in big monetary unions. “ can one size fit all? ” according to theory, an optimal currency area needs free movement of the factors of production as well as flexible markets and a limited impact of asymmetric shocks on the various partners of the monetary union. the euro area is not an optimal currency area. but does that really exist? in europe, however, factor mobility, financial integration and fiscal transfers between member states are less than in the united states. in this case, can monetary union function properly? there is only one single monetary policy and the ecb can only focus it on price stability at the level of the euro area as a whole. in this kind of framework, the burden of adjustment, to asymmetric shocks for instance, rests on other mechanisms such as wages and relative prices or fiscal policy. what are the hard facts? as far as inflation is concerned, as i said before, both inflation rates and the divergences between them dropped sharply before the move over to monetary union. since then, inflation differentials have not been any higher than the gaps that can be observed between the main american regions. as for the dispersion of growth rates within the euro area, this has not got any wider since exchange rates were irrevocably fixed and is also comparable to the american situation. in both cases – inflation and growth – the difference with the united states lies in the persistence of the differentials : it is nearly always the same countries that have the highest or the lowest inflation or growth rates. growth differentials may be linked to catching - up processes ( and here they are to be welcomed ), to specific shocks or to inappropriate national policies. they may be the result of differences in trends or cyclical situations, too. business cycles have become more closely aligned over the years under

##economic policy aiming at stability, where monetary policy is oriented towards price stability and fiscal policy, within the framework of the so called pact for stability and growth, towards sound public finances. these objectives are crucial for the confidence of economic agents and sustainable economic growth. the single currency is also a major step forward in terms of more efficiency, by lowering transaction costs and increasing price transparency and competition, which will be even more evident once the notes and coins will have been introduced. monetary union also intensifies the integration of european financial markets, which improves financing possibilities for companies. the single currency should also help speed up other necessary structural reforms in europe. finally, the introduction of euro banknotes and coins will provide not only the new currency but europe itself with more visibility all over the world. and within europe, the use of the same notes and coins from helsinki to lisbon and athens via brussels will give the european citizens, much more than is now the case, the feeling of belonging to a community sharing the same destiny.