mr noyer covers several topics on the euro : six months after its introduction speech delivered by christian noyer, vice - president of the european central bank, at the institute for international monetary affairs ’ ( iima ) seventh symposium on “ the euro : its promise and challenge to the world economy ” in tokyo on 6 july 1999. first, let me thank the organisers of this conference for inviting me to participate in this panel. indeed, in my view, the title of this symposium, “ the euro : its promise and challenge to the world economy ”, has been well chosen. the introduction of the euro, which was successfully launched just over six months ago, marks a significant milestone in the process of european integration and will bring considerable benefits to the nearly 300 million citizens of the euro area. the introduction of the euro will have a profound impact on the world economy, as well as the euro area itself, in years to come. however, the euro area also faces a number of challenges if the full potential of the single currency is to be realised. the organisers have specifically asked me to cover several topics. therefore, i should like to start my remarks by considering the current economic situation and the outlook for the euro area. i shall then explain the relationship between monetary and fiscal policy in the euro area and deal briefly with the issue of differing economic situations in member states. finally, i should also like to comment briefly on the question of structural reforms. 1. the current economic situation and outlook for the euro area real economy according to a preliminary estimate released by eurostat in mid - june, overall output growth in the euro area stabilised in the first quarter of this year. real gdp in the first quarter was up 0. 4 % on the previous quarter, following a gradual slowdown from 0. 7 % to 0. 3 % during the course of 1998. even though caution should be exercised when interpreting these figures, since they combine data compiled partly in accordance with the old methodology and partly with the new ( esa 95 ), two broad conclusions may be drawn : 1. while previous data had suggested a rather sharp slowdown in the last quarter of 1998, the revised data imply a pattern of slowing real gdp growth which was spread more evenly over the course of 1998. 2. the weakening of output growth came to a halt during the first quarter of 1999. data for industrial production for april 1999 confirm this picture. although there is not yet a clear sign of a recovery in the industrial sector,

i should like to emphasise how important it is that monetary policy is supported by structural measures to improve the functioning of labour, product and capital markets. this would also enable the economies of the euro area to operate at a higher degree of resource utilisation and thus make better use of the available productive capacity. in particular, it is widely recognised that the euro area faces a problem of high and persistent unemployment, which is largely structural in nature. there is therefore, a pressing need for measures targeted at making labour and product markets work more flexibly. furthermore, flexible labour and product markets are also important to enable national economies to adapt to shocks, particularly those that do not affect the countries of the euro area equally. monetary policy has to maintain price stability in the euro area as a whole, so national labour and product markets need to be flexible enough to adjust to such shocks. although some countries have adopted a wide range of measures, the progress made so far in pursuing structural reforms has been uneven and not yet satisfactory overall. however, there are some encouraging signs. over the past few years, the european community has stepped up its efforts in this field, aiming to co - ordinate and improve member states ’ policies in the field of employment and labour market reform and to initiate reforms that improve the functioning of goods, services and capital markets. the experience of countries that have undertaken significant reform programmes shows that it takes time to implement structural reforms and even longer for the benefits of these reforms to materialise in full, but that these reforms bring about swift progress in employment creation and the reduction of unemployment. finally, let me stress that while there are challenges ahead, the independence of the eurosystem, together with the clear mandate to maintain price stability in the euro area, provides a solid foundation for the long - term stability of the euro. the first six months of 1999 have seen the successful launch of the new currency. in the coming years the euro will make an important contribution to further economic and financial integration, helping to improve the growth potential of european economies.