caused markets to lose confidence in the euro. as in past crises, the mounting uncertainty triggered substantial upward pressure on the swiss franc. why switzerland doesn ’ t have the euro considering its close economic ties to the euro area, why didn ’ t switzerland ever seriously contemplate joining the single currency? politically and legally speaking, the answer is simple : a country can only join the eurosystem if it is already an eu member state. swiss voters and cantons rejected accession to the european economic area in a referendum in 1992, and in 2001 followed this up by voting against a popular initiative favouring a “ yes to europe ”. these decisions settled the question of whether switzerland should join the eu for the foreseeable future. quite apart from these political and legal factors, the economic case for joining the euro had always been weaker for switzerland than for many other european countries. switzerland ’ s inflation had always been relatively low, and the country thus saw no need to import monetary credibility by pegging the swiss franc to a stable currency. furthermore, it makes sense for switzerland to pursue an independent monetary policy given the structure of its economy – particularly in view of its status as an international financial centre and the research - intensive nature of the industrial goods it produces. monetary policy between fixed and floating exchange rates in 1973, when the system of fixed exchange rates established in bretton woods towards the end of the second world war collapsed, switzerland decided to adopt a system of floating exchange rates. over the long term, this decision has proved its worth. however, there are pros and cons to both fixed and floating exchange rate policies. the disadvantage of fixed exchange rates is that they prevent a country from pursuing its own, independent monetary policy ; monetary policy in a given country cannot be geared towards ensuring price stability. equally, the central bank is virtually unable to take account of economic developments or respond to the kind of special circumstances that typically arise during crises. ultimately, under a fixed exchange rate system, monetary policy is delegated to the central bank of the country to whose currency one ’ s own is pegged. in the long term, this leads to relatively high fluctuations in both production and inflation. floating exchange rates allow a country to pursue its own, independent monetary policy ; however, the disadvantage of such an approach is that it can result in major ( nominal and bis central bankers ’ speeches real ) exchange rate fluctuations. a country ’ s currency may thus be substantially under or overvalued – sometimes for

as a proportion of gdp over the last years despite many challenges and a difficult environment. in 2007 the commission estimates that public spendings will represent 43. 8 % of gdp, which is 4. 3 percentage points less than in 1999. cooperation between the two major monetary authorities i hope i have by now convinced you that the monetary authorities in the united states and the euro area face challenges that are similar. internally, diversity in these large areas is of the same magnitude, although possibly not of the same nature. externally, both regions count on a large external sector, with significant bilateral linkages. similar experiences naturally call for close working relations. this interaction has become particularly intense since the advent of the euro and the setting up of the european central bank and of the eurosystem, but at the same time builds on a long - standing history of central bank multilateral cooperation in various international institutions and fora, including the bank for international settlements since the 1930s, the international monetary fund since the mid1940s, the g10 since the 1960s, the g7 since the mid - 1970s and, more recently, the financial stability forum and the group of twenty. contacts with the federal reserve these international organisations provide an excellent opportunity for the federal reserve chairman and myself, for the members of the boards as well as for the staff of both the fed and the ecb / eurosystem, to meet very regularly. to give you some idea of the level of contact we have, i can say that ben and i meet, through the g7, the g10, the g20, the imf and bis meetings, probably a little more than once a month on average. in addition, mr bernanke and i jointly participate in a number of international conferences. indeed, through our regular meetings, ben and i have built up a very close working relationship, a climate of mutual trust, and a platform for direct and quick contact in special circumstances that would require urgent communication. why is this important? the purpose of our contact is not the coordination of our monetary policies. this would be incompatible with the orientation of our policies towards our respective domestic objectives. rather, the benefit of our close contact lies in the in - depth exchange of information and views on recent economic developments, on the monetary, financial and economic outlook in our respective economies, and on the policy challenges ahead. this includes, as i discussed before, trade and financial linkages between our two economies, directly or via other economies. sharing first