to less than 4 per cent on average in 1996. towards the middle of the year inflation expectations began to improve significantly ( figure 8a ). market yields on government securities started to come down, especially for longer maturities ; the lira strengthened, partly owing to the appreciation of the dollar. on 31 may 1996, in addition to confirming that the conditions existed for inflation to fall below 4 per cent in 1996, we stated that it would be possible to achieve a more ambitious target in 1997 : an inflation rate of less than 3 per cent. between may and december of last year the average monthly rate of inflation on an annual basis was close to 2 per cent. the survey of consumer price expectations carried out last september indicated a rate of inflation of between 3 and 3. 5 per cent in the first quarter of 1997. the survey carried out in december indicated a rate of between 2. 5 and 3 per cent for the first half of this year ( figure 8a ). 6. the outlook after the breakdown of the gold exchange standard all countries ’ currencies became of a purely fiat nature. this is a new epoch in monetary history. international capital movements tend to expand, with a multiplication of money and credit at the global level that makes it increasingly difficult for authorities to exercise quantitative control. the volume of funds traded, the rapidity with which they can be shifted and the sensitiveness of market participants to economic and metaeconomic information can generate tensions in financial markets and influence the quotations of currencies and securities, with significant effects on economic activity and prices, even in medium - sized economies. greater monetary stability in europe not only benefits individual economies but also contributes to the solidity of the international financial system. the weakness of the economic cycle and the curbing of inflation have led to a fall in interest rates. easier monetary conditions have been a major factor underlying the rise in bond and share prices. monetary stability, public finances in order and flexible productive structures and factor markets are necessary to protect individual economies from destabilising speculative movements, to enable them to share in the benefits of the global market and economic and financial integration in europe. this is the context in which policies must be implemented to permit the full employment of all the available resources of labour, saving and physical capital. in the last four years italy has made significant progress in re equilibrating its external position, curbing the budget deficit and controlling inflation. in 1996 the slowdown in inflation permitted a substantial fall in interest

banknotes because of concerns about the health of a bank or the banking sector. that is why we are working hard to establish a european banking supervisor, and why we should take all necessary measures as soon as possible to restore confidence in the banking sector. now, let me come back to the main purpose of our event today : the launch of the €5 banknote of the europa series. the main reason for the new series is that the first euro banknotes were issued over 11 years ago and the technology in those banknotes is more than 15 years old. even though the number of counterfeits is relatively low, it is important to maintain trust in euro banknotes and to stay ahead of developments. so on 2 may we are bis central bankers ’ speeches launching the €5 banknote as the first denomination of the new series. the other denominations will follow in ascending order in the next few years. apart from the more vivid colour of the €5 banknotes, the most visible change in the banknotes is probably the emerald number on the front and the portrait of europa in both the watermark and the hologram. however, maybe the most important changes are those which are invisible to the human eye. we have not only applied a special coating, which will make the banknotes more durable and should extend their life, but have also incorporated several new or enhanced security features which are used by banknote authenticity devices and banknote handling machines. in most countries the €5 banknotes will be mainly brought into circulation via bank counters and the cash ordered as change by retailers. as a result, the new €5 banknotes will gradually arrive in everyone ’ s wallets. only in some countries will €5 banknotes also be issued via atms, but even in these countries banks seem to be reducing the availability of €5 banknotes in atms. we don ’ t see this as a good development ; banks should consider issuing more €5 banknotes via atms. it would be convenient both for the public, which tends to pay cash for small - ticket items, and for retailers, which would need less change. additionally, it would also mean that the overall quality of the €5 banknotes in circulation would be higher in many countries. in the presentations today and tomorrow you will learn more about the design and security features of the new euro banknotes and about the preparations for the introduction of the europa series by central banks and the various stakeholders in the cash cycle. these presentations will make