jean - claude trichet : emu after seven years - successes and challenges speech by mr jean - claude trichet, president of the european central bank, at the frankfurt chamber of industry and commerce, frankfurt am main, 5 may 2006. * * * ladies and gentlemen, es ist eine große freude fur mich, heute auf ihrer konferenz uber meine ansichten und erfahrungen zur europaischen wirtschafts - und wahrungsunion und zum euro sprechen zu durfen. selbstverstandlich ist mir bewusst, dass der deutsche industrie - und handelskammertag ( dihk ) immer ein starker befurworter der wahrungsunion und allgemein des europaischen integrationsprozesses war. lassen sie mich den weiteren vortrag nun in englisch halten. [ it is a great pleasure for me to speak today at this conference about my views on and experience of economic and monetary union in europe and the euro. i am fully aware that the deutscher industrie und handelskammertag ( dihk ) has always been a strong supporter of the emu and, more generally, of the european unification process. before continuing, please let me switch into english. ] in the first part of my talk today i shall elaborate on the reasons why i think that the single currency and the single monetary policy introduced more than seven years ago have worked very well. nevertheless, past success is not an excuse to overlook the challenges that lie ahead of us all, policymakers and social partners. in the second part of my speech i shall thus try to make clear how, in my view, these future challenges imply an urgent need for action and reform going forward. and finally, i will discuss how such reforms support the ecb ’ s monetary policy and the adjustment mechanism in the euro area. but let me start with the first years of emu. a credible and transparent new monetary policy framework at the time of the introduction of the euro, a completely new monetary policy framework was introduced in europe, with the european central bank ( ecb ) conducting a single monetary policy for the entire euro area, consisting of eleven and soon twelve countries and more than 300 million citizens. the most remarkable aspect of this new endeavour is that since the very beginning the ecb and the euro managed

- year growth of m2 + cds average outstanding, has slowed somewhat compared to summer 1996, reflecting a shift of assets to those outside m2 + cds. recently, m2 + cds average outstanding has been growing at around 3 per cent on the whole. regarding money market rates, the overnight call rate ( uncollateralized ) has moved at a level slightly below the official discount rate with some fluctuations. the 3 - month cd rate has stayed at around 0. 6 per cent. meanwhile, the long - term government bond yield declined in early april to a record low of below 2. 1 per cent, but began to rise in late april in line with the recovery in stock prices and reached 2. 65 - 2. 70 per cent in late may. it has recently declined again and has moved at around 2. 4 per cent. with respect to bank lending rates, the short - term prime lending rate has remained at a record low level of 1. 625 per cent since september 1995. the long - term prime lending rate declined to a record low of 2. 5 per cent in december 1996. it was raised by 0. 6 percentage points in may, and then lowered by 0. 2 percentage points in june to 2. 9 per cent. in these circumstances, short - and long - term contracted interest rates on new loans and discounts ( up to april ) have moved at record low levels. on the stock exchange, the nikkei 225 stock average began to recover in the second half of april 1997, reflecting the fact that market uncertainties about the economic outlook and about the japanese financial system had gradually subsided. recently, it has been moving at over ¥20, 000. in the foreign exchange market, the yen depreciated in early may to ¥127 - 128 to the u. s. dollar. however, the yen ’ s depreciation reversed rapidly, particularly in the first half of may, as concern about the appreciation of the u. s. dollar strengthened, and as interest rate differentials between japan and the united states narrowed somewhat. the yen has recently moved at around ¥113 - 114 to the u. s. dollar. meanwhile, the yen has also been appreciating against the deutsche mark since may and has recently moved at around ¥65 - 66.