euro works – that is, in my view, plain to see. since 1999, the euro area has grown to a community of more than 330 million people. it is the world ’ s second largest economy, accounting for around a quarter of global exports and more than 15 % of global investment. and the euro has established itself as a strong and stable reserve currency. in that time, the european central bank ( ecb ) has maintained price stability in line with its mandate, despite the most severe crisis since the 1930s. we have defended our currency bis central bankers ’ speeches against unfounded fears about a break - up of the euro area. all this means that countries that join the euro area today can be confident that its central pillar, its monetary policy, is sound. i understand that there are some concerns here about the changeover to the euro potentially leading to opportunistic price rises. but the latvian authorities are taking measures to prevent this. these measures build on the experience from 17 previous euro changeovers. i call on all those involved to remain attentive to these initiatives. for its part, the ecb will be conducting a communication campaign to ensure that the people of latvia are well informed about the euro coins and banknotes, in particular the security features of the banknotes. ensuring sustainable convergence the second lesson we have learned is that to prosper within monetary union, countries need to ensure sustainable convergence. sustainable convergence means more than meeting a set of nominal targets at a certain point in time. it requires real economic, legal and institutional convergence prior to adopting the euro. and crucially, it requires continued efforts once inside monetary union. the reason that many countries are making painful adjustments today is that once inside the euro area, they allowed themselves to diverge too much. i know the authorities here are aware of the key challenges of maintaining convergence. these include, first of all, avoiding a renewed boom - bust cycle in latvia following euro adoption. this implies that the authorities need to continue with sound fiscal policies, and to ensure that labour cost developments remain conducive to competitiveness. the challenges also include strengthening further the efficiency and effectiveness of institutions in latvia. and finally they include safeguarding the long - run stability of the banking and wider financial sector. i am therefore confident that by keeping the right policy orientation, the ingredients are present for latvia to thrive within the euro area. completing economic and monetary union the third lesson we have learned since 1999 is that we need to complete our

having been the “ sick man of europe ” in the early 2000s, the german economy has become today ’ s engine of the euro area economy. moreover, growth has recently become increasingly domestically driven. this has clearly also facilitated the recovery in the other euro area economies, via higher german import demand. 3 / 5 bis central bankers'speeches concerning inflation, fears that our accommodative monetary policy could boost excessive inflation in germany have clearly not materialised. headline inflation has picked up this year from the very low level of 0. 4 percent last year. most of this increase resulted from the significant pickup in oil prices. underlying price pressures in germany by contrast, have remained subdued, as indicated by the rather stable core inflation rate. the increase in house prices may be more of concern, particularly in some of the biggest cities, but there is so far no evidence of broad - based excessive house price valuations in germany as a whole. strong economic growth demonstrates that germany is the member state that, after ireland, shows the highest increase in income per person since the beginning of the euro. at the same time, the present unemployment rate is the lowest in the last 37 years and is well below the european average. challenges ahead let me summarise. we are witnessing a sustained economic recovery in the euro area as a whole and in all its member states. in particular, countries under financial assistance programmes have been implementing significant policy measures to improve their resilience and competitiveness. many of these reforms will support potential growth but they tend to exert their full impact with a considerable lag. in any case, such measures have increased the resilience of member states ’ economies and of the euro area as a whole. at the same time, these positive developments should not lead to complacency. inflation, which is the core of our mandate, is still below our target after four years of growth supposedly above potential. we are not yet fulfilling our mandate and that is why monetary policy will have to continue to be very accommodative, assuring favourable financial conditions to foster growth and spur wages and prices. on the other hand, vulnerabilities and challenges remain in many euro area economies. unemployment rates have indeed come down, but in particular the number of young and longterm unemployed is still unacceptably high. moreover, despite an adjustment of flow variables, such as the absence of excessive credit growth, lower budgetary deficits and improved current account balances