stalled or just paused? what is the appropriate institutional framework for an enlarged europe? these are questions best left for the historians and political scientists to answer. but one question is essential : can monetary union progress and survive without a full fledged political union? can we – to quote, otmar issing, my former colleague in the ecb's executive board – have " a currency without a state "? for me, like for otmar issing, the answer is clear : yes, we can. from the start, the european project has ventured into unchartered territory. we have created an institutional framework without any historical precedent and model. this is especially true for monetary policy, where we have transferred the decision making powers to a supra national entity. in that sense, monetary union in itself has a clear political dimension. this was only possible because euro area members had achieved a high degree of convergence in attitudes and preferences. it also happens that, in all countries in the world, central banks have been made independent in the last decades, and monetary policy has been, as a consequence, depoliticised. this was seen as a necessity to ensure price stability. from that point of view, the euro is no exception and the ecb's mandate is similar to those of other central banks. so, monetary union in europe is well grounded, both on its technical and political pillars. actually, the euro to day seems to me the main driver for european integration. it exists. it is a success. the institutional process is working smoothly. sharing the same banknotes and currency has given european citizens a strong sense of common identity and joint destiny. and those who worried that monetary union would impede growth in europe should be comforted by our recent record. europe's growth rate to day is equal – or higher – to the us. in the six years since the creation of the euro, twice as many jobs have been created in europe as compared to the us economy. admittedly, we are lagging behind in terms of productivity growth, innovation capacity and market flexibility. but there is nothing which cannot be corrected provided the necessary policies are implemented with determination and continuity. this is why, looking beyond the current difficulties, i feel very optimistic. and the reason for this optimism is the euro. the single currency has the potential to bring enormous benefits to european nations, which they can use to achieve a high degree of stability and prosperity, in the interest of all countries in the

the main adjustment tool. in this context, fiscal criteria were designed in order to assess the ability of the government to conduct sound fiscal policies. is the euro a model of monetary cooperation for other regions in the world? what is happening in europe is triggering a lot of interest in other parts of the world. many countries to day, especially in asia, are confronted with the same challenges we faced, in europe, fifteen years ago : first, is it possible to reconcile greater economic integration with exchange rate volatility? and, if not, can fixed or pegged exchange rates regimes be sustained in an environment of full capital mobility? taken together, these two questions led european countries to forgo monetary autonomy. is this always advisable? this is a very difficult question. my own answer would be to progress towards closer monetary cooperation with determination and caution. a strong degree of political determination is necessary because, clearly, full monetary autonomy becomes more and more problematic when economic integration has reached a certain stage. with greater economic openness, it is no longer an option, for small and medium size economies, to be indifferent to their exchange rates. on the other hand, independent management of their exchange rates by countries with close trade and investment links can lead to undesirable outcomes. thus, cooperation is warranted. monetary union, however, is a demanding endeavor. i have alluded earlier to the theory of optimum currency areas. while it is debatable in some of its details and developments, the main message is clear : the exchange rate remains an essential adjustment tool whenever economies are faced with asymmetric shocks and markets are insufficiently flexible to absorb them internally. this is still the case in many regions of the world where regional economic integration moves at a rapid pace, but between countries whose economic structures and specialization are very different. in such circumstances, it would be extremely penalizing to give up the possibility of real exchange rate adjustments. this shows that there is no single model of monetary cooperation which could be duplicated around the world. it is up to each group of countries to find their own sustainable path to economic integration. will monetary union evolve towards closer political union? as you well know, these are difficult times for european political integration. the treaty creating a constitution for europe was not ratified by two founding members of the european community. as a consequence, the future of political integration is fraught with uncertainties. these raise several important questions for the future. has the process of political integration