theoretical considerations are on shaky ground, the empirical findings argue against them, too. in a larger and more liquid euro capital market, the reallocation of assets does not necessarily lead to increased exchange rate fluctuations, and a generally increased exchange rate volatility has not been observed so far either. on the contrary, measured in terms of the standard deviation of daily percentage changes, the average volatility of the euro ’ s rate against the us dollar between january 1999 and may 2000 was actually somewhat lower than the volatility of the d - mark against the us dollar between 1991 and 1998. in concluding, i would like to emphasise that although the interests of europeans and americans may differ here and there, i do not see any fundamental differences, at least not in the economic fields that i have just discussed : smooth balance of payments financing, higher growth rates in europe, stability of the financial system and flexible exchange rates between the major currencies. i think most europeans would subscribe to these objectives as well. however, emu will not automatically help to achieve these objectives. consequently, major challenges for european and american policymakers still exist, some of which could be dealt with by competing for better policies. others, such as maintaining the stability of the global financial system, argue in favour of closer cooperation. at many levels - for example, the imf, the financial stability forum, the bis - such cooperation actually takes place without being ultimately hampered by the complex political structures in europe. competition and cooperation will presumably remain the salient features of transatlantic relations in the foreseeable future. interpreted as the struggle for the best solutions and by assuming joint responsibility, these two guiding principles - competition and cooperation - might complement each other almost ideally.

in europe. i think the opposite is true. in addition, structural reform in europe would stimulate growth in the long run and create positive spill - over effects in other regions, too. the transformation of the euro area into a “ new economy ”, characterised by more flexibility, higher growth rates and low inflation rates would definitely be much appreciated by our american partners - and not only by them. whereas some observers expect emu to increase the necessity for and the feasibility of structural reform, others argue that an intensified competition in a currency union might call for more social protection. second, the smooth financing of the american current account deficit seems to be an issue of concern on both sides of the atlantic. with the euro potentially rivalling the dollar, some economists have been expecting huge shifts in international portfolios which might limit the ability of the us to finance its current account deficit. however, in the light of my remarks about international capital flows, i think that external financing constraints for the united states will not be too narrow as long as a reasonable economic policy is pursued. see, for example, c r henning ( 2000 ), p 17ff. third, the us is interested in the smooth functioning of the international monetary system. in principle, us authorities prefer flexible exchange rates. in the case of a crisis, however, the us is interested in an efficient decision - making process at international level. fourth, systemic stability is an objective with high priority for us policy. the question as to whether the emergence of the euro as an international currency might indirectly contribute to systemic risks has already been raised. in particular, large and rapid shifts out of the dollar have been seen as problematic, whereas gradual changes in market shares are not an issue of concern. in the run - up to monetary union, there was much speculation about how the launch of the euro would influence volatility on the foreign exchange markets. it was said that the rivalry between a few major international investment currencies might lead to stronger short - term exchange rate fluctuations, since changing market sentiments would immediately turn out to the advantage of one currency and disadvantage of the other. it was further argued that the euro area ’ s degree of openness in foreign trade would be smaller than that of the individual participating countries prior to their entry into emu and that the eurosystem would therefore probably be more inclined to pursue a policy of benign neglect than, for example, the bundesbank had been in the past. apart from the fact that some of those