private borrowers resident outside the euro area issued more than a fifth of their international debt in euros from the beginning of 1999, roughly a twofold increase over the total share of the legacy currencies before the introduction of the euro. furthermore, european investors have substantially diversified their bond portfolios since the introduction of the euro, encouraged by the removal of the exchange rate risk. this enables them to achieve higher rates of return for a given level of portfolio risk. additionnally, let me recall recent trends towards mergers or close co - operation between stock exchanges, securities settlement systems and clearing houses, and so forth. had the euro not been created, would it have been thinkable that the paris, brussels and amsterdam exchanges would merge, creating euronext? it is evident that the introduction of the euro is fostering very large - scale market restructuring throughout europe. the total stock market capitalisation of euro - area equity markets stood at more than 5. 5 trillion euros at the end of 1999, compared with a market capitalisation of 3. 6 trillion euros at the end of 1998. this figure reflects not only the increase in stock prices but also the powerful drive towards securitisation of private companies throughout europe and, in particular, the take off of the “ new markets ” network. there are still some barriers to further integration of eu capital markets. in this regard, the eurosystem has welcomed the objective of the european council, meeting in lisbon in march 2000, of accelerating completion of the internal market for financial services, and to set a tight timetable so that the financial services action plan is implemented by 2005. the eurosystem also fully supports the initial policy conclusions of the committee of the wise men on the integration of the eu securities markets, in the conviction that their implementation would contribute to an improved allocation of capital in the european economy and to developments in securities markets coherent with the needs of the single monetary policy. ii. 2. an incentive for further structural reforms a / the euro is, per se, also a strong catalyst for structural reforms in all non - financial domains in europe : a single currency facilitates the full comparison of prices, taxes and earnings. i think that the euro could encourage " cross - fertilisation " of best practice through stronger co - ordination of member states'structural policies in areas such as labour markets, education and training, job creation incentives, effective welfare safety nets, etc. it is the reason why the european council, meeting in luxembourg in december 1997

based on legitimate fears : for example the sustainability of greek debt, weaknesses in the institutions of monetary union and divergences in competitiveness between euro area member states. again, it was by failing to make the necessary efforts ( to ensure budget discipline, preserve competitiveness or finalise the institutions of a european financial union, for example ) that these countries put themselves in a position to be rushed or even pressured by the markets and bear the consequences of their overreaction. governments should not use finance as an alibi or as a scapegoat. on the contrary, they should assert their ascendancy over it through strict financial management. 2. finance should not dominate the economy, it should serve it. i ) reasserting the importance of regulation and supervision : bis central bankers ’ speeches • the period from the 1990s to the start of the 2000s is sometimes called “ the great moderation ” because inflation remained stable at moderate levels and growth appeared solid and sustainable. in reality, however, the period saw frequent buildups of financial excesses. these excesses led to the crisis, and they were firmly rooted in the dogma of self - regulation – a dogma which was itself fostered by the belief that financial markets were somehow sacred and inherently “ efficient ”, capable of setting “ real ” prices. • the crisis completely discredited this theory. from the first sparks of turmoil, the lack of transparency in certain segments of the market – notably cdos – significantly exacerbated the loss of confidence. financial institutions had insufficient capital cushions to absorb the shocks, leading to bankruptcies and forcing the government to bail them out, a process that was extremely costly for public finances, but also very damaging to financial sector accountability, as at times it meant bank losses were “ socialised ” whereas previously their profits had been “ privatised ”. this is the problem of moral hazard, a subject which will no doubt come up over the course of this session. • the facts therefore served as a stark reminder that self - regulation just doesn ’ t work, primarily because of the imperfections in certain financial markets, which are neither transparent nor efficient ( like the cds market for example ) and can generate potentially huge negative externalities. thus, regulation and supervision were once again elevated to their rightful role after the crisis – a role they should never have lost. by way of an aside, i note that the crisis was triggered in the united states by unregulated entities ( condu