denominated in us dollars. however, eliminating exchange rate fluctuations, the share of the us dollar increased by just over 1 percentage point in the course of 1999 and then showed virtually no change up to march 2000. the use of a currency as an official reserve is one important factor in determining its international role. however, its use by the private sector as an investment and financing, a payment and vehicle currency is pivotal. the introduction of the euro accentuated the integration of european capital markets and the trend towards securitisation and the associated disintermediation of the banking sector. the euro also acted as a catalyst in diversifying european portfolios away from local - market - based to euro - based issues. developments in the international financial markets show that the euro quickly established itself for new issues. thus, in the first nine months following its introduction, the euro accounted for a large share of international bonds and notes issues and almost equalled the dollar : according to bis data, in 1999 : • net issues of bonds and notes in euro amounted to us $ 521. 2 bn ; • us $ 543. 9 bn of net bonds and notes issues were dominated in us $ ; • for the second quarter of 2000 the bis reports net issues of bonds and notes in euro equal to us $ 95. 8 bn ; • compared with a net issue in us - dollar equal to us $ 96. 1 bn. but the euro is still a young currency : according to the bis, by end of june 2000 stocks of all bonds and notes amounted to : • us $ 2, 615. 6 bn denominated in us $ ; • compared with us $ 1, 616. 0 bn denominated in euro ; • which means a share of the us $ of 47. 7 % compared to a share of the euro of 29. 7 %. that shows that adjustments in the portfolios of international investors or in official reserves of the public sector will take much longer as much bigger sums have to be moved and large - scale portfolio shifts would have implications for securities prices and exchange rates. it is also highly unlikely that the euro will displace the dollar as an investment and reserve currency in the foreseeable future because there is no public issuer in the euro area comparable to the us - treasury and because the european capital markets are still fragmented to some extent - despite monetary union. considering the first point, it has been suggested recently that national governments in the euro area should pool

the union as a single economic area and, politically, as an economic power factor. to do this, it will be necessary to develop the relevant arrangements and to strengthen the political representation of the currency area on the external side. from a legal point of view, this boils down to the question of a future constitution of europe. against that background, it is much less complex and detailed than might be assumed at a first glance. here, the most important thing will be to continue developing regulations that already exist and to divide responsibilities among nation states and the union. community institutions with clearly defined tasks and responsibilities might be helpful beyond the narrow area of economic policy. but, at present, it has to remain an open question whether the nation states are actually prepared to transfer powers to european bodies in the core area of state sovereignty. without a political union there cannot be a uniform external representation of the euro area. a benchmark in this connection might be a permanent seat on the united nations security council. an indication from france and the united kingdom of their willingness to give up their seats in favour of a european seat on this body would be a very clear signal of the willingness to make progress towards a political union. the basis for extending the international role of the euro will be improved by making further advances in integration on the way towards a political union. the euro is not merely the result of a technical exchange rate arrangement but also is an expression of the willingness and determination to achieve further integration. such further progress is therefore the precondition for the credibility of the monetary union and an appropriate international role of the euro in future.