economy. with its 290 million consumers, the euro area is an economy similar in size to the us. gdp is lower than the one of the us, it contributes for a larger part to world exports. gdp of the euro area represents about 22 % of world gdp, this is somewhat less than the us whose gdp reaches 29 %, but considerably higher than japan ’ s gdp that stands at 13 %. on the other hand the euro area is the largest commercial partner, with some 20 % of total exports, against 16 % for the us and 8 % for japan. the emergence of a european international currency is one of the results that was expected from the introduction of the euro and it is an obvious advantage for european companies. however, the eurosystem has adopted a neutral stance concerning the international status of the euro. its importance as an international currency will be determined by the markets. to assess the international character of the euro after somewhat more than nine months, i will briefly go into the few functions usually attributed to an international currency. we can distinguish the official use of the currency and its use for private transactions. in the first instance, the euro can be used by public authorities as a reserve currency or as a pegging currency. although no recent data are available on the relative share of the euro in the official reserves, one may suppose the euro to be the second reserve currency after the dollar, if one transposes the international weight of the currencies the euro has replaced. on the other hand the euro is used and will in all probability be even more used in the future as a pegging currency by some eu countries that have not joined the emu, by countries of central and eastern europe that are candidates for eu membership and by some other emerging countries. i would also like to mention countries such as argentina, brazil, canada and south africa which have issued international bonds denominated in euro in order to diversify their foreign debt to the benefit of the european single currency. the international use of the euro by private operators can primarily occur within the framework of transactions or for investment and financing operations. at the beginning of the 90s one estimated that about 50 % of the exports of goods and services was invoiced in dollars, one third in one of the currencies that participate in the euro and only 5 % in yen. although the part of the euro area in world exports is greater than that of the us, the euro will only assert itself progressively as a payment currency

of discipline can have on the climate of confidence. it seems that people in europe more and more have a “ ricardian perception ” of fiscal deficits. they are more aware of the enormous challenges and costs our ageing society entails. people in the different european countries are really worried about the long - term sustainability of public finances. high fiscal deficits will only worsen their anxiety and so incite them to increase their precautionary savings. in this context, the rules of the stability and growth pact are appropriate. it is not correct to describe it as a fiscal straitjacket. starting from a budget in balance or in surplus at the peak of the cycle, a country can let the automatic stabilisers fully operate when the activity is slowing down. the main problem with the pact is, i think, that better incentives are needed to respect fiscal discipline during good economic times. so i hope that the forthcoming recovery will be the right moment for the european governments now facing budgetary difficulties, to put their finances again on the right track, so that in that field it will be possible to reconcile short time flexibility with long term sustainability. in that case fiscal policy may again become an element of the required lasting macroeconomic stability. it is by paying more attention to the quality of public finances and by rendering the structure of taxes and that of expenses more growth oriented that governments can contribute to stimulating europe ’ s growth potential. i refer to expenditures such as education and improvement of human capital, public investment in infrastructure and research and development. r & d could become a comparative advantage of europe. at the moment europe invests 1. 9 p. c. of gdp in r & d and is thus lagging behind the us figures and the lisbon target ( 3 p. c. ). over the past years, european policymakers have become more aware of this growth problem europe is facing. so, in march 2000, during the lisbon summit, an ambitious strategy was adopted aiming to increase the rate of sustainable economic growth and even to enable europe to become the most competitive and dynamic knowledge - based economy in the world in 2010. in order to achieve such a strategic goal the lisbon agenda has brought together the different strands of reform policies on product, labour and capital markets aiming at promoting a more efficient allocation of resources and at higher growth potential. moreover, in order to facilitate monitoring of progress with reforms, quantitative targets have been fixed to measure progress in particular on the labour market in achieving for instance higher