have not overreacted and remained cool - headed. this is a positive sign. central banks, including the eurosystem, have reacted decisively to the situation with liquidity provisions and other measures. german banks do not report liquidity problems. the german financial system is stable and over the past years its resilience against adverse shocks has markedly improved. moreover, the universal banking model – a characteristic feature of the german financial system – has proven its robustness and stability. these structural achievements will help to cushion current tensions due to higher perceived counterparty risk and a necessary unwinding of positions on the market for credit risk transfer – both unavoidable outcomes in the face of an insolvency of one of the major market participants. the financial turbulence has created the most challenging situations for financial intermediaries, for central banks, for supervisory agencies, and for regulatory bodies in decades. and since the causes of the crisis are deeply rooted, a comprehensive coordinated response at the international level is evidently warranted. in this context, the financial stability forum – the fsf – in particular is playing a crucial role in the process of mitigating the ongoing difficulties and making the financial system more resilient to future shocks. the fsf was established in 1999, following a report by the then bundesbank president, hans tietmeyer. the fsf brings together senior representatives of national financial authorities ( for example, central banks, supervisory authorities and treasury departments ), international financial institutions ( such as the imf or the bis ), international regulatory and supervisory groupings ( for example, basel committee on banking supervision, international accounting standard board ), committees of central bank experts ( such as the committee on the global financial system ) and the european central bank. the fsf ’ s mandate is to assess vulnerabilities affecting the international financial system, to identify and oversee action needed to address these, and to improve coordination and information exchange among the various authorities responsible for financial stability. in doing so, the fsf aims to promote international financial stability, improve the functioning of financial markets, and reduce the tendency for financial shocks to spread from country to country, thus destabilising the world economy. the fsf seeks to give momentum to a broadbased multilateral agenda for strengthening financial systems and the stability of international financial markets. the necessary changes are enacted by the relevant national and international financial authorities. in a nutshell, the fsf acts as a central hub for all

the euro, it seems legitimate to take initial stock : as regards domestic price stability, i. e. the movement of the inflation rate, the history of the euro has so far been a “ success story ”. the rise in the harmonized consumer price index, currently at 1. 2 %, is still a good way off the absolute limit of “ less than 2 % ” set by the governing council. even so, increased vigilance is needed here since a certain upward pressure on consumer prices has to be expected, not least on account of the steep rise in oil prices. for this reason the governing council of the ecb decided at its meeting on 4 november 1999 to raise the ecb ’ s three main interest rates by 50 basis points each. the governing council is convinced that the timely rise in interest rates will avoid the need for stronger measures later ; on balance the prospects for sustained price stability remain good. [ figure 6 ] – not available “ there is no light without shadows ”, says a german proverb, and that brings me to a topic which has been much discussed among the public at large, namely the movement of the external value of the euro : the expectations about the positioning of the euro in the global financial markets were very mixed. “ euro over - optimists ” had reckoned with a rapid appreciation of the euro against the us dollar because they were expecting central banks, institutional investors and private investors to take early and marked advantage of the euro in order to diversify their portfolios, which often focused on the dollar. by contrast, “ euro sceptics ” drew attention to the fact that it needs a long time before a new and untried currency is accepted as an investment, reserve and transaction currency. as a matter of fact, the euro made a promising start in the foreign exchange markets, with a rate against the dollar of 1. 18. but the exchange rate soon began to edge down, reaching an all - time low, at 1. 0124, on 12 july. the main reasons for this depreciation were no doubt the astonishing resilience of us business activity and the associated distinct interest - rate advantage of the united states. in the meantime, the reference rate of the euro against the dollar has picked up distinctly, and for some time past has been moving within a range of 1. 03 – 1. 09 ( on... the current level is... ). this upward movement is undoubtedly due to the improved economic