for the greater part, these are matched by liabilities in the form of currency, bank deposits and government deposits. the excess of assets over liabilities is represented by capital and internal reserves. these totalled 2½ billion euro at end - 1999. this is the figure to which the term “ free reserves ” is applied. this is the capital which supports the bank. it is also a buffer against changes in the value of external reserves, arising from movements in the euro vis - a - vis other currencies. relative to the size of our balance sheet, this figure is at the lower end of the scale vis - a - vis other euro area national central banks. the national central banks in the eurosystem no longer conduct foreign exchange intervention. it is fair to ask, therefore, whether they now have surplus external assets. there is a recognition that this question should be addressed in due course. these reserves are subject to call by the european central bank. in all likelihood it will make a further call for additional capital and foreign reserves. it would seem preferable therefore that the issue of superfluous reserves be settled at the general european level rather than taking unilateral action. our external reserves are denominated, for the greater part in us dollars and to a much lesser extent in sterling and yen. there is also a small quantity of gold. the reserves are invested in deposits and securities and are managed by reference to an independent benchmark. the central bank has a very good record in managing large - scale funds. in respect of 1998 we earned a surplus of 225 million euro ( ir£177 million ), mainly from investment of reserves and interest. of this, 193 million euro was transferred to the exchequer. banknotes and coin to most people the euro probably remains largely academic until it is available in their pockets. it is still considered a currency in transition. in less than two years from now the new banknotes and coin will have begun to replace national currencies. the impact will be huge at local level ; immediately the euro will become the concern of everybody. may i remind you that the largest banknote will be 500 euro ( roughly £400 ) and the smallest coin will be one cent ( which is 4 / 5 of a penny ). there will be seven banknotes and eight coins. our production arrangements are already well in hand. in recent years we have invested more than £30 million in new plant and machinery. coin production is under way since last

##ist approach was seen as necessary to promote industrialisation and economic development, as ireland was a relatively poor country with a small domestic market and few natural resources. beginning in the 1960s, ireland began to move towards a more open and export - oriented economy, with a series of policy reforms aimed at promoting trade and investment. attracting these firms provide a range of employment opportunities, advanced technologies, export proficiencies, and management and manufacturing best practice. in recent years, agglomeration, where the successful operation of existing multi - national companies attracts additional investment within the same, or similar, sectors has helped. however, these connections also mean that the irish economy experiences greater pass - through from developments in the global financial cycle. this is one factor explaining the higher volatility of ireland ’ s economic aggregates relative to other economies. for example, central bank research shows a significantly higher response of ireland to negative global shocks than our larger trading partners. our research also shows that growth prospects in small countries are more susceptible to negative shocks than larger, more diversified countries. with regards to geoeconomic fragmentation in particular, our analysis suggests that spillovers from the reshoring activities of large trading partners are generally negative, largely as a result of reduced demand for irish exports. policy implications almost a year ago, i noted that the impact of any weakening of global integration on medium to long - term inflation is something that is not yet understood fully. despite an increase in focus on this topic since then, i think we still have a lot to learn. geoeconomic fragmentation can potentially have significant effects on inflation. most directly, changes in the availability of goods and services can affect their prices. if countries become more self - sufficient and rely less on imports, this could lead to a reduction in global trade flows, which would reduce competition and potentially raise the costs and prices. this channel could be particularly strong for a country like ireland that is highly dependent on imports. of course, over time, countries could become better at substituting imports and produce them more cheaply, exerting downward pressure on costs and prices. another potential effect of geoeconomic fragmentation on inflation is an increase in the volatility of inflation. this is because changes in global trade patterns and shifts in supply and demand can lead to sudden and unpredictable changes in the price of goods and services. this can make it difficult for central banks to manage inflation and may require them to adjust interest rates more frequently or aggressively than they would otherwise. while it is difficult to