of around eur 23 billion euro banknotes was shipped abroad via the banking system. in the mid - 1990s, the bundesbank estimated the deutsche mark banknotes circulating outside germany to be worth between eur 32 and 45 billion. if this is taken as a rough approximation of the amount of legacy currency banknotes held outside the euro area, then the available evidence suggests that a considerable part of this has already been converted into euro banknotes. let's now consider euro - denominated bank deposits. they also played an important part in the cash changeover outside the euro area. indeed, before the cash changeover, several non - euro area countries encouraged households to deposit their legacy currency cash holdings in euro - denominated accounts, rather than exchange them directly for euro banknotes. credit institutions, particularly foreign - owned banks, widely advertised euro - denominated accounts at attractive conditions. this strategy was intended to reduce both the logistical and transaction costs related to changeover operations. in some cases, especially in south - east europe, another objective was to boost confidence in banking systems. in co - operation with a number of central banks in countries neighbouring the euro area, the ecb has gathered data on the scale of these developments. overall, in around 30 countries, euro - denominated deposits increased by a total of more than eur 13 billion in 2001. information for the first months of 2002 suggests that this may be a lasting phenomenon as euro - denominated deposits decreased only slightly. in a nutshell, the available evidence tends to indicate that most of the legacy currency banknotes have been converted into euro, either in cash or deposit form. this suggests that the euro has successfully replaced the legacy currencies in the regions neighbouring the eu. let me add that – despite the considerable amount of euro banknotes transferred abroad – foreign circulation of euro banknotes only constitutes a limited proportion of the total currency in circulation. the estimated amount of euro banknotes circulating outside the euro area at the end of june accounts for only 8 % of total currency in circulation and only 0. 4 % of the monetary aggregate m3. therefore, while the ecb monitors these developments closely, they currently play no significant role in the assessment of monetary developments in the euro area with regard to price developments. demand for euro banknotes over the longer term let me also take a somewhat longer - term perspective with regard to the demand for the euro in the euro area and outside. as already mentioned, a preliminary

– behind mali, the bahamas and nepal. starting a business in this country requires nine separate procedural steps. new zealand, the leader in this category, can get it done in a single administrative act. reforms to make it easier for start - ups to enter the market would also enhance competition and spur innovative power. lower barriers to market exit would have a similar effect. both types of reforms are decisive elements of the economic process of change, namely what joseph schumpeter once described as “ creative destruction ". it is certainly a core task of general government to eliminate competitive distortions and repair market failure. moreover, economic policy - making overall needs to create an environment which is conducive to growth. research is one area in which general government can provide a boost through targeted promotional measures. basic research is often the first step in the chain of innovation. it yields new knowledge on which firms can later build. this area of research is not only expensive but also entails a high degree of uncertainty. most of the time, it is impossible to tell at first whether such research will yield commercially marketable results. however, once new knowledge has entered the world, it can be used by others without having to bear the costs and risks of research. under these conditions, less research is conducted by the private sector than would make sense from an economic perspective. this is where the state has to step in. the state, of course, can itself invest in basic research, for instance through its universities. however, firms have to become active in transforming academic knowledge into marketable innovations. the state can create the appropriate framework conditions for this to happen, particularly by protecting intellectual property rights. 4 / 8 bis central bankers'speeches and tax breaks for research can also help to create an environment conducive to innovation. the federal government has now addressed this issue specifically by putting forward draft legislation. as the legislative process rolls on, it will of course be vital that the rules are not worded in a way that is overly detailed, not least in order to keep the effort required of firms and tax administrations within manageable parameters. on the other hand, the “ free rider problem ”, amongst other issues, needs to be avoided. that notwithstanding, we must not lose sight of corporate taxation. tax reform in the united states has stoked international tax competition. other countries, such as france and belgium, have since initiated tax cuts. when it comes to taxes on corporations, germany is edging its way