special issue : “ 20 years of east - west integration - hopes and achievements ”, oenb. would have resulted in national interests prevailing, which would have made it nearly impossible to quickly and efficiently counter the crisis. the measures taken are only one side of the coin when it comes to discuss the euro ’ s role as a shelter. it is plain to see that eu membership alone has stabilized the region. it boosted access to international financial markets and enhanced the provisioning of indirect support to local banks. membership in monetary union would have further increased access to liquidity during the crisis and provided shelter against speculative currency attacks. moreover, the longer - term benefits of monetary union include • lower transaction costs, • increased competition and consequently lower profit margins, • stronger financial market integration and • a credible monetary policy target towards price stability. capital flows have enabled the financing of current accounts and have been an important ingredient of the cesee growth model so far. however, whether in or outside the euro area, some cesee countries will have to adjust their growth model in order to render their internal and external imbalances more sustainable. higher returns attracted capital inflows from western europe but in light of the crisis, one was tempted to ask whether this source of financing would dry up. this leads me to the question of whether rapid euro adoption is reasonable for cesee countries. during the crisis a relatively short - lived debate evolved whether countries outside the euro area should be allowed to join monetary union immediately. this would have meant to abolish – or temporarily suspend – the convergence criteria laid down in the maastricht treaty. in this respect, erm ii is an important instrument to stabilize acceding countries ’ exchange rate and guarantees a smooth transition from a national to the single currency. it is important to note that the convergence criteria are key determinants of the sustainability of the fixed exchange rate implied by adopting the euro. while entering the euro area is obligatory for almost all eu members, choosing the right moment is a demanding task. there are several factors that affect the decision : • the mobility of capital and labor and • the flexibility of domestic wages are essential factors for gauging the readiness of a country to join monetary union. besides that, one should bear in mind the maastricht criteria, in particular • convergence in prices, • a focus on long - term interest rates and • fiscal stability. against the backdrop of the current crisis, the discussion is revolving around the fiscal stance of countries

at purchasing power was still below that of the u. s. a., economic activity in the european union exceeded that of the u. s. a. in other words, 2008 figures demonstrate that the potential euro area of the future outpaced the u. s. a. in terms of economic activity. from a micro perspective, the use of the single currency outside the euro area is most prominent in its neighboring countries, where strong cultural and political ties exist. today ’ s afternoon session will provide some insight into the use of the euro in the cesee region, featuring the presentation of the main findings of the euro survey carried out by the oenb. 7 they show that the dissemination of euro cash holdings is strong in some ( potential ) candidate countries ( the former yugoslav republic of macedonia, serbia, albania and croatia ). this highlights the perception of the euro as an anchor of stability and underscores its important role as an international means of payment and store of value. however, euroization can also be accompanied by certain risks, especially if financial markets are still to deepen. foreign currency loans to households ( predominantly denominated in euro ) are substantial in some countries. without euro area membership, balance sheet effects can seriously jeopardize households ’ ability to pay back their debt, which, ultimately, may feed through to the real economy. at its 10th anniversary the euro has been tested by a severe global financial and economic crisis. the worlds ’ worst recession since the 1930s poses a wide range of oenb ( 2009 ), the euro – a stability anchor in turbulent times univ. - prof. dr. ewald nowotny, governor oenb, bologna, 10. 9. 2009. exact citation of baldwin ’ s statement : “ most of the rose effect literature treats currency unions as magic wands – one touch and intra - currency - union trade flows rise between 5 % and 1400 %. the only question is : how big is the magic? " baldwin, r. e. ( 2006 ) : “ the euro ’ s trade effect. " working paper series 594, european central bank. european commission ( 2008 ) : “ emu @ 10 : successes and challenges after ten years of economic and monetary union ”, european economy 2 / 2008. ecb ( 2009 ), statistics pocket book, http : / / www. ecb. int / pub / pdf / stapobo / spb200910en. pdf.