to the eu. in economic terms, it is hoped that the launch of the euro will likewise yield substantial benefits : it is anticipated that the disappearance of exchange risk within the eurosystem and the intensification of competition in the european financial, merchandise and services markets will have a favourable impact on the further enhancement of the common market. don ’ t let yourselves be confused by the fact that the old currencies, such as the deutsche mark or french franc, are still in circulation in the 11 euro countries. euro banknotes and coins will not be launched until the year 2002 because of the immense logistical trouble it will cause. actually, in statutory and economic terms, the euro is already the sole currency in the eurozone ; the old currencies are – as we say in the jargon – nothing but the “ non - decimal denominations ” of the euro. at this juncture, i have no wish to bore you unduly with figures. as regards the dimensions of the euro monetary area, it is enough to say that, in terms of their population and economic performance, the eurozone and the united states are roughly comparable ( 290 million emu europeans compare with 270 million us americans ; in terms of economic performance, the euro area, accounting for 15 % of global gdp, is second only to the usa, at 20 % ). ii the statutory and institutional prerequisites of the euro are laid down in what is known as the maastricht treaty. figure 2 the european system of central banks ( “ eurosystem ” ) european central bank ( ecb ) + 11 national central banks primary objective : maintenance of price stability, accompanied by independence from instructions from government institutions ( the general economic policy of the community is endorsed only insofar as the primacy of the objective of price stability is not in jeopardy ). according to that treaty, the so - called “ eurosystem ” consists of the european central bank and the national central banks of the 11 member states. hence the deutsche bundesbank is integrated in the eurosystem, rather than sunk – a small but significant distinction. i am not addressing you today as one of the last representatives of a species doomed to extinction. the primary objective of the eurosystem is the maintenance of price stability. that institution is independent of instructions from government bodies. it is required to support the community ’ s general economic policy only insofar as that is possible without endangering the objective of price stability

bringing down the financial system as a whole. to that end, more than three years ago the bundesbank proposed automatically extending government bonds ’ maturity by, say, three years if the member state is granted financial support from the european stability mechanism. this would help to figure out if the country ’ s problem is one of temporary illiquidity or insolvency. additionally, doing away with the preferential treatment of sovereign debt in banks ’ balance sheets is of the essence. the current regulatory framework permits preferential treatment of sovereign exposures in various forms. while bank exposures to a single counterparty are limited, in principle, to a quarter of their eligible capital, exposures to sovereigns are exempted from that large exposures regime. thus, many european banks hold bonds from one sovereign only – their home country. but a high level of undiversified sovereign exposure is what makes sovereign default a potentially systemic event. for this reason, the large exposures regime needs to apply to sovereigns as well. moreover, sovereign exposures are privileged by low or zero capital requirements. an adequate risk - weighting of sovereign bonds would make banks more resilient if the fiscal position of the respective sovereign were to deteriorate. and it would bring spreads more into line with the underlying risk, thus sending a disciplining signal to the sovereign. if additional capital requirements for european banks were imposed to cover sovereign exposures, the additional capital would be rather small on aggregate – albeit with substantial differences between banks. the inclusion of sovereigns in the large exposures regime might lead to more substantial repercussions. but these would be manageable if introduced over a transition period – which, without question, has to be granted. 5. conclusion ladies and gentlemen, let me come to a close. the biggest bottleneck for growth in the euro area is not monetary policy, nor is it the lack of fiscal stimulus : it is the structural barriers that impede competition, innovation and productivity. if these barriers were torn down by all euro - area countries, the growth outlook would shift considerably – and this would instantly give rise to higher investment. complementary reforms on the european level aimed at the services sector could provide a further boost. taken together, these measures are expected to lift growth by as much as 15 % above the current baseline level after ten years. to me, that sounds like a goal worth expanding some political capital to achieve, as do efforts to bring liability and control further into