jean - claude trichet : the euro - successes and challenges speech by mr jean - claude trichet, president of the european central bank, at the european american press club, paris, 14 january 2005. * * * introduction ladies and gentlemen, it is a pleasure to be here today to share with you some thoughts on the successes and challenges of the euro. european integration has moved steadily forward over the past decades, witnessing considerable success and triggering fundamental change. the euro, which is probably the most visible and tangible symbol of this integration process, is this year entering its seventh year, with a single currency and a single monetary policy for more than 300 million citizens. all in all, the european monetary union has managed very well in not always so easy conditions, despite some critiques, doubts and fears that were voiced earlier on. of course, the euro also has brought about significant challenges. i would today like to discuss in more detail what i see as the main successes and challenges of the euro. i would also like to reflect on the need to accept change and reform in order to move forward. let me start with the successes to date. successes the first success i would like to stress is a technical success which enabled a smooth implementation of the single monetary policy from day one, namely the integration of money markets in early january 1999. thanks to careful technical preparations of connecting national payment systems, smooth interbank transactions with small spreads were made possible. looking at european financial markets more in general, while there has been a continued process of integration over the last decades, the arrival of the euro certainly accelerated this process by removing barriers to cross - border trading and creating more scope for risk sharing and diversification. in particular, the depth and breadth of financial markets have increased as a consequence of the elimination of exchange rate risk and the rapid growth of new market segments, such as the corporate bond market, allowing more investors to access the various financial markets in the euro area. this in turn has led to more efficient financial markets which have contributed to economic growth. second, euro cash changeover stands out as a major milestone in european monetary history. it was also a particularly successful event in terms of logistics. changing the currency for more than 300 million people in a few weeks was truly daunting. the efficiency and enthusiasm with which this changeover took place was exemplary. this success can be attributed to the quality of the preparations made by all players involved and at all levels, not to mention the enthusiastic reception of the general

use of such digital currencies. we also have to gear up on climate change – and not only because we care as citizens of this world. like digitalisation, climate change affects the context in which central banks operate. so we increasingly need to take these effects into account in central banks ’ policies and operations. the ecb has already moved in this direction. first, we are working to extend our knowledge about the economic impact of climate change and ensure that its effects are better reflected in our economic analyses, models and forecasting methods. second, through its financial stability tasks, the ecb is monitoring systemic risks stemming from climate change and the transition to a carbon - neutral economy. this work will ultimately enable us to test how well the euro area banking sector is able to withstand climate - related risks. finally, the ecb has taken steps to align its own investment decisions with the objectives of the paris agreement. in our staff pension fund, for instance, we decided to switch to a low - carbon index, and we are investigating what else we can do in our market operations. the strategy review launched by the ecb ’ s governing council last month will also take stock of how rapid digitalisation and the threat to environmental sustainability – together with globalisation and evolving financial structures – have further transformed the environment in which monetary policy operates. it will consider all aspects of the ecb ’ s policy framework. we need to reflect on how we can best deliver on the ecb ’ s price stability mandate for the benefit of all european citizens. as part of this process, we will consult the public and listen to their views, expectations and concerns with an open mind. while i have thus far focused on the ecb, it is important to recognise that digitalisation and climate change are universal developments that affect all of us in europe and worldwide. europe is uniquely positioned to master these challenges. building on common safeguards and competitive incentives, the single market offers enormous potential for economic modernisation. europe can harness this potential in its quest to design effective and affordable responses to the 2 / 3 bis central bankers'speeches challenges at hand. but an important pillar of europe ’ s response to an increasingly globalised world – economic and monetary union ( emu ) – should not be forgotten. and the role of the european parliament, as colegislator, in getting our response right cannot be understated. over recent years, the euro area ’ s architecture has evolved substantially. but essential elements are still missing