##ing the stability of the euro is the biggest responsibility of the european central bank. the safest currency for all investors is the currency of the country with the lowest inflation rate over time. here, the prospects for the euro are good. over the years, inflation in european core countries has been constantly lower than in the united states, and there is no reason to believe that this would change with the start of emu. it is also very important that the euro will be strengthened by the institutional independence of the european central bank and its objectives of price stability. furthermore, safeguards have been put in place, such as the stability pact, to prevent emu countries from pursuing unhealthy fiscal policies. all in all, i firmly believe that the euro will be a strong currency. 5 as regards the other major determinants of the future importance of the euro - trade and financial markets - the role policy - makers can play is more limited. this is not to say that the euro ’ s starting position is unfavourable. on the contrary, over the last twenty years international private portfolios have been gradually diversified in the direction of european currencies. also, european currencies have been increasingly used as vehicle and, to a lesser extent, as invoicing currencies. there is every reason to believe that these trends could be strengthened by the introduction of the euro. after all, the euro will eventually cover an economy whose gross domestic product is larger than that of the united states. if intra - eu trade is excluded, the eu and the us both account for around 20 percent of world trade. furthermore, with 350 million inhabitants the eu is the largest consumer market in the oecd area, consumers whose needs will partly have to be met by trading with the rest of the world. companies which trade principally with european counterparties may be inclined to invoice and pay in euros. if the euro is going to be widely used in international trade transactions, exporters and importers within the european union will no longer be exposed to exchange rate risks nor have to hedge against such risks. the european business community thus has ample opportunities to reap the benefits provided by the introduction of the euro. 6 it is more difficult to predict the future role of the euro in international financial markets. fortunately, at the european level agreement has been reached on legal provisions that guarantee the continuity of ecu contracts. this provides a good starting point for euro capital markets. ultimately, however,

currencies. it will also help those countries which will not join emu right from the start to orient their policies towards convergence, in order to enable them to qualify for participation as soon as possible. to conclude......, there are reasons to believe that over time the euro could develop into an important reserve and invoicing currency. good opportunities for the euro arise from the fact that the eu economy is even larger than that of the united states. furthermore, it is the responsibility of european policy - makers to safeguard the attractiveness of the european currency by pursuing sound policies. in this respect, the stability of the euro is in the good hands of the ecb. at the same time, i would like to emphasize that the success of the euro is also in the hands of the markets. it should be borne in mind that it took the dollar half a century and two world wars to replace sterling as the international currency, despite the fact that the united states had been the major economic power since the beginning of this century. all in all, these are challenging times for europe. let me, therefore, propose a toast to the future success of the euro.