the 1980s was a further step, aiming at freedom of movement within the community for goods, services, capital and individuals. with the introduction of a single currency, the countries of europe will come still closer to each other in economic and political terms. at the same time, yet another obstacle to the creation of a large internal market in europe will be removed. thus, emu is to be seen primarily as one aspect of a larger, political project. most analyses, however, have tended to concentrate on the union ’ s pros and cons in an economic context. the advantages that have been cited for the participating countries include lower transaction costs for trading in a common currency, increased transparency and competition in the single market, and low, stable inflation. the lack of an exchange rate as an instrument for stabilisation policy is mentioned as one of the drawbacks. sweden ’ s parliament decided in december 1997 that sweden would not be joining the monetary union from the start, mainly on account of the lack of public support. the decision was made after a committee of experts had reported on participation ’ s advantages and drawbacks for sweden. the commission was basically in favour of sweden being a member of emu but was of the opinion that, given the disadvantages considered, sweden should not participate from the start. the costs in terms of stabilisation policy were assumed to exceed the benefits from economic efficiency. the report ’ s assessment of political aspects favoured swedish membership of emu. the report gave the riksbank an occasion to present its appraisal of the monetary union. this differed and amounted to a recommendation that sweden should participate from the start. we considered that the commission had overestimated the costs for stabilisation policy, while the economic and political benefits were likely to be even greater than envisaged in the report. since the compilation of report, moreover, the political reasons for participating from the start have grown in that more countries than expected will now be members from the beginning. 2. the euro ’ s stability the euro will exist as an account - based currency as of next january. while banknotes and coins denominated in euro will not yet be in circulation, it will be possible to make transactions in euro. so what will be the euro ’ s role in currency markets? will it be stable? and will it compete with the dollar as an international reserve currency? as we all know, predicting exchange rate movements is difficult. in general, one can say that a currency

by an inflation rate of 2 per cent or less. the latter has raised the question of whether sweden ought to revise its inflation target. the question is somewhat premature in that the ecb ’ s target formulation has still to be finalised. moreover, the suggested formulation is in line with what has applied in germany, where on average in recent decades monetary policy has not resulted in a rate of inflation below 2 per cent. in view of this, together with the advantages of an inflation target that is symmetrical, there are no grounds at present for considering any change in sweden ’ s inflation target. the ecb has been given a high degree of independence in fulfilling the price stability target without any short - run political considerations. the institutional conditions for monetary policy credibility are accordingly good. by itself, however, this is not enough. credibility must also be achieved continuously, through a responsible monetary policy that is properly understood and supported by society in general. at first there may be considerable uncertainty about how the single monetary policy functions and how signals from the ecb should be interpreted. much will therefore be required initially of the ecb in explaining its policy, presenting the analyses behind its decisions in an understandable way and creating a broad understanding of the monetary policy in every part of the union. this understanding may be tested particularly severely if price pressure in a particular country deviates from the average so that the repo rate is not perceived as appropriate to the national situation. the national central banks in the euro area should be able to lend a hand here, both in communications with the public and by providing sound analyses of tendencies in their home country. this brings me to the discussion about the ecb governing council. concern has been voiced in the debate because the composition of the council, the ecb ’ s supreme decision - making body, might lead to policy being influenced by strong national interests at the expense of the total picture. one source of this concern is that so many of the council ’ s decision makers are national central bank governors, who might allow for national interests. comparisons are made with the us federal reserve, whose decision - making body has a smaller proportion of regional governors. another cause of this concern is that political accountability in the european community is essentially exacted at the national level ; it is largely in the national arena that economic policy is discussed. while these problems cannot be dismissed out of hand, i believe they have been exaggerated. the members of the council are jointly responsible for making the ecb a success and