jurgen stark : the adoption of the euro – principles, procedures and criteria speech by mr jurgen stark, member of the executive board of the european central bank, at the icelandic chamber of commerce, reykjavik, 13 february 2008. * * * i ladies and gentlemen, it is a great pleasure for me to attend this conference, together with distinguished guests and speakers. in my remarks, i would first like to set out the european union ’ s approach towards the adoption of our single currency, the euro. i will then spell out the eu ’ s and the ecb ’ s stance on unilateral euroisation. i will conclude my remarks with a brief overview of the potential economic costs and benefits of unilateral euroisation. the eu ’ s approach towards the adoption of the single currency the creation of the single currency has been a long and truly historic process. sixty years ago, europe was marred by political disarray and economic disorder. with the treaties of paris and rome, europe ’ s leaders started the construction of a united europe on the ruins of the second world war. since then europe has achieved a lot : • one of the most important achievements is the single market, with the free flow of goods, services, capital and people across national borders. consumers in europe benefit from the larger supply of goods and services. the european companies benefit from the enlarged markets. • another milestone was the creation of the economic and monetary union, at the beginning with 11, then 12 and 13 and 15 members since january this year. o the treaty establishing the european community assigns the european system of central banks the primary objective of maintaining price stability. the ecb has managed to gain and maintain trust of the public and of market participants by delivering price stability. although the single monetary policy faced a number of significant challenges, the ecb managed to stabilise the hicp inflation on average at 2, 1 % from 19992007. this compares with an inflation rate of 3 % in the nine years preceding the emu. o the inflation expectations in the euro area have been anchored in line with the ecb ’ s definition of price stability : below but close to 2 %. this underlines the high reputation the ecb ’ s monetary policy has gained over time. ii given the topic of my speech, the principles, procedures and criteria that govern the adoption of the euro, i would like to underline the key principles for joining the euro area at the very outset : 1. a country must

, the international liquidity position increased from us $ 27, 4 billion to us $ 33, 5 billion. in addition to accumulating foreign - exchange reserves, the bank reduced the level of its borrowed reserves from around us $ 3, 2 billion at the end of august 2007 to us $ 896 million at the end of august 2008. borrowed reserves were reduced with the repayment of the outstanding portion of the syndicated loan entered into in 2005. south africa is one of a number of emerging - market countries that have a relatively high current - account deficit, which underlines the need for a healthy level of reserves. the current level of reserves puts south africa more or less in line with many of its peers in the emerging - market community and it meets the generally accepted reserve - adequacy measures. however, the bank does not regard the current level as excessive and is likely to continue accumulating reserves at a moderate pace when market conditions permit. enhancing the reserves management processes of the bank has been a strategic focus area for a number of years, commensurate with the growing responsibility associated with higher levels of reserves. this improvement continued during the past year. the primary focus during the period under review was the formulation and partial implementation of a strategic asset allocation, which involved the quantification of risk tolerance in the form of a target duration per currency and a risk budget to facilitate the active management of reserves. in line with these developments, the roll - out of the internally managed portfolios was initiated to move closer to the approved strategic asset allocation. currency distribution in celebration of former president nelson mandela ’ s 90th birthday on 18 july 2008, the bank issued five million pieces of the bi - metal commemorative r5 coin depicting the former president. arrangements were made to distribute this special commemorative coin to all provinces prior to 18 july 2008, thereby ensuring that they were available nationally on mr mandela ’ s birthday. the national payment system in march 2008 the bank celebrated the 10th anniversary of the implementation of the south african multiple option settlement ( samos ) system. during 2008 an upgrade of the samos system was initiated to facilitate the implementation of delivery - versuspayment in the settlement of money - market securities. another project was initiated to review the south african settlement system infrastructure and applications, and to benchmark them against those of other central banks. business continuity management also received special attention during 2008. interbank clearing and settlement are of systemic importance and the bank co - operated with stakeholders to mini