clear some hurdles. but we need a system that better balances the immediate imperatives of the short run with the important building blocks for longer - run prosperity. that ’ s what i want to talk about today. we aspire to an international monetary and financial system that favours inclusive and sustainable growth. in the long run, that is best achieved by a system that promotes economic integration — with free trade, open capital markets and flexible exchange rates. but the current system isn ’ t there yet, and while we aspire to the long run, we live in the short run. for both these reasons, policy - makers face a delicate balance. too much confidence that open markets will always deliver economic and financial stability increases the risk of volatile episodes that hurt jobs and growth. but too much focus on managing short - run pressures risks thwarting the medium - to long - run adjustments that are fundamental to productivity and rising standards of living. finding the right balance between managing short - run pressures and ensuring steady progress toward liberalization is the crucial task of the international monetary and financial system. while much progress has been made in the 50 years since the end of bretton woods, achieving this balance remains elusive. and looking ahead, it will not get easier or less critical. as the recovery from the pandemic progresses, and major economies begin to remove exceptional monetary stimulus, the system will likely come under more pressure. tighter financial conditions globally will suit some countries better than others. and beyond the pandemic recovery, new and even bigger challenges are on the horizon, including climate change, the digitalization of currencies and growing inequality. in my time today, i ’ d like to talk about canada ’ s place in the global monetary and financial system. then i ’ d like to highlight some of the challenges the system faces, particularly in the wake of the covid - 19 crisis. finally, i ’ d like to outline our vision for the 21st century. canada and the global monetary and financial system cross - border economic integration has been a critical source of increased prosperity for canadians and for citizens the world over. to be effective, the international system needs to deliver stability in prices and allow exchange rate movements that reflect fundamentals. at the same time, it must be able to adjust to shocks and structural changes in a timely way. in canada, we have longstanding experience with open capital accounts, inflation targeting and flexible exchange rates, and they have served us and a growing number of countries well

of the euro is fascinating, with roots extending back to the years immediately following world war ii. i will not go through the steps that led to the introduction of the euro. suffice it to say that the process has been a major political, administrative, and technical feat. imagine the logistics of transposing monetary values from national currencies – german marks, french francs, italian lire, etc. – into euros during the first weekend of 1999. and apparently this conversion was carried out without any major hitches. but the process of conversion is not yet complete. new euro notes and coins are not actually circulating yet, and will not be until january 2002. while financial market transactions must be – 2 – carried out in euros, for all other transactions the use of the euro is optional over the next three years. the euro can now be used for purchases by credit or debit card, cheque, or traveller ’ s cheque. companies may do their accounting and pay their workers ’ salaries in euros. but, on the whole, most europeans are unlikely to notice much change right away in their daily lives, other than that prices in stores may be quoted in both euros and the old domestic currency. what is crucial, however, is that the conversion rates of the national currencies in the monetary union are now irrevocably fixed against the euro and against each other. in this sense, the national currencies now exist only as price measures and as temporary subdivisions of the euro. just as the canadian dollar is composed of 100 cents, you can think of the euro as being temporarily composed of 6. 56 french francs or 1. 96 german marks. what are the economic implications of the euro? what does it mean for these 11 countries to be sharing a common currency? first, you may have noticed that, as much as the launching of a common currency across these countries ( collectively referred to as euroland ) was a major event, it did not have a dramatic initial financial or economic impact. this is because of arrangements that have been in place for some time. for example, all currencies in the system had been effectively pegged to the german mark since may 1998 ; and some for much longer. with pegged exchange rates, interest rates in participating countries have tended to move together, in line with german interest rates. and over the past year, short - term official interest rates in all 11 countries gradually converged to the current single rate of 3