global foreign exchange reserves are held in euro – and we have to bear in mind that not all countries disclose such figures. these are just a few statistics. the point i want to make is the following : when economic agents outside the euro area choose the euro as their preferred currency, this testifies to the trust they place in its stability and credibility. we see this trust as a sign of distinction for the euro. at the same time, we consider the global use of the euro as a market - driven process. therefore, the ecb takes a “ neutral ” view on the international role of the euro : it neither hinders nor encourages its global use. what about the economic pillar of emu? the effective functioning of institutions and the credible implementation of national economic policies are essential. in order to support the conduct of the single monetary policy and the smooth functioning of the monetary union, in order to ensure and better coordinate the implementation of sound, sustainable and consistent national fiscal policies, and in order to foster higher output and employment growth, an economic policy framework is necessary. this consists of a set of institutions as well as of common policy orientations, rules and procedures which have been put in place. these include the stability and growth pact, the broad economic policy guidelines and the lisbon agenda. has this framework delivered results? on this front, the past record has been somewhat mixed, but in recent years there have been positive developments and the prospects are improving. substantial progress has been made towards a more efficient european economy and the increase in employment has been impressive since the launch of the common currency. nevertheless, we also have to admit that productivity and economic growth over the past decade have not been as strong as we would have liked – especially in comparison with the united states. iii. the challenges for economic policies in europe currently, the euro area economy enjoys a solid and broad - based recovery and growth is expected to remain robust in the coming quarters. there are two key economic policy issues concerning the long - term performance of the euro area economy that must be effectively addressed. first, how to raise the potential for higher sustained non - inflationary growth in the euro area as a whole. second, how to achieve this in a reasonably balanced way so as to optimise the benefits of all participants in monetary union and preserve its cohesion. for europe ’ s current economic expansion to remain dynamic on a sustainable basis in the increasingly competitive globalised economy, it is essential to further strengthen the two fundamental determinants

interest rates and government bond yields. the capital outflow was only halted, and devaluation fears allayed when the imf announced in december 2000 an additional us $ 7 billion to alleviate the balance of payment difficulties stemming from the recent crisis. interest rates declined and there was a modest rise in capital flows in january 2001. in february 2001, a second financial crisis was triggered by a political dispute between prime minister bulent ecevit and president ahmet necdet sezer. the dispute raised concern that the country ’ s threeparty coalition government might collapse and raised doubts about the authorities ’ commitment to reform. market confidence in the system was shattered and the turkish lira faced a fresh major attack in february 2001. the central bank spent us $ 4. 5 billion, one sixth of its reserves, to defend the lira. these attempts, however, failed to restore confidence and the turkish authorities decided on 22 february 2001 to allow the lira to float freely. turkey ’ s economic programme was again strengthened following the crisis that led to the floating of the lira. the new economic framework included increased transparency, accountability and good governance in both the private and public sectors. the improved programme aimed to strengthen the primary fiscal position of the public sector, reduce the government ’ s immediate borrowing requirement and address major bank restructuring. market sentiment, however, again started to deteriorate in early july 2001 when the imf postponed a portion of the turkish loan. the differences between the imf and the turkish authorities were fortunately resolved and the imf approved the eighth review of turkey ’ s economic programme supported by the three - year stand - by arrangement on 12 july 2001. the imf ’ s executive board also completed the ninth review of turkey ’ s economic programme on 3 august 2001. this decision will enable turkey to draw an additional us $ 1. 5 billion from the imf. the imf is convinced that there are encouraging signs that the economic downturn in turkey is bottoming out, and that the targeted lowering of inflation is materialising, which could permit declines in interest rates. the imf is also encouraged by the considerable progress in the structural reform agenda, especially in restructuring the banking system. however, the turkish lira has again started to depreciate rapidly since the beginning of august as confidence in turkey ’ s ability to repay us $ 26 billion of debt ( before the end of this year ) has been shaken by repeated disputes between members of the governing coalition. the turkish authorities