month interim period until the start of formal monetary union, there is certainly far more justification for the phrase than there was then. firstly, subject to the well - known time - lags, the monetary policies of all the participating national central banks exert an impact on the entire euro area. hence it is essential not to introduce any national inflationary pressures into the monetary union. secondly, upon the entry into monetary union at the end of the year, if not before, uniform money market rates will pertain. on account of the increase in mutual interdependence in europe, monetary policy cooperation between the national central banks will have to be reinforced, even though final responsibility will rest with the individual national central banks. there will presumably also be a further convergence of central bank rates. however, such convergence need not take place at the very beginning of the interim period. limited interest rate differences and exchange rate movements may well continue to exist for some time. it cannot yet be predicted where the common level of central bank rates will actually be by the end of the year. that depends primarily on monetary and anti - inflationary policy developments throughout “ euroland ”, with the larger countries naturally bearing particular responsibility on account of their greater economic weight. in this connection, the future course of the “ mix ” of fiscal and monetary policy in the individual countries will certainly play a part. after all, in future undesirable developments will not only exercise an impact on the domestic economy. from now on all “ euroland ” - central banks have to take that into account. iii as soon as the european central bank has been set up, the ecb governing council will have a number of important decisions to take before the start of monetary union. for, needless to say, european monetary policy must be fully operational from the very first day of monetary union. in particular, that calls for - a forward - looking, empirically - backed strategy, and an effective arsenal of instruments. the european monetary institute has already done a good deal of preliminary work on both those subjects. although a consensus has been reached on most issues, a number of options and details are still unresolved. it is on these that decisions are still required - if need be, majority decisions. in any case, the new ecb governing council will in part be composed differently from the existing emi council. as regards the monetary policy strategy, two models have emerged from the emi ’ s preliminary work : the strategy of direct inflation targeting

do not stand a chance in the real world. in point of fact - as the discussions three weeks ago at the spring meeting of the imf and world bank in washington showed - the key issue is how and in which direction the existing system can be strengthened. unfortunately, the crucial importance of well - functioning markets for sound international finance is often underrated. in south - east asia, at any rate, the functioning of the markets was obstructed in two respects : - externally, by clinging too long to exchange rate parities which had become unrealistic, and internally, by investment decisions which were not geared adequately to sustained profitability. any contribution to the prevention and solution of such crises cannot but enhance the markets ’ ability to function. and in this context it is not very helpful if the imf unduly emphasises its financing role and steps in at an early stage with overly large financial packages. that only creates moral hazard problems. this is because such financing may easily be misconstrued as an invitation to the countries concerned, as well as to other endangered countries, to refrain from undertaking essential structural reforms. private investors, too, are tempted to pay less heed to the risks. charles dallara was quite right to draw attention to these moral hazard problems in his recent letter to the chairman of the interim committee. in my opinion, improving surveillance is a much more promising approach. besides macroeconomic data, financial market data should be monitored more closely than has been the case hitherto. what we chiefly need, in my view, is more, and more up - to - date, data on countries ’ foreign currency debt. this is a challenge addressed to borrowers and lenders alike. the imf should endeavour to obtain more, and above all better, data especially from the debtor countries. for the markets ’ ability to function, it is essential that the business data collected should be more transparent, more complete and more up - to - date. it is only on this basis that the imf can perform its primarily catalytic task. that strengthens the structure of the international financial system. and it should also be considered whether governments that fail to comply with such transparency requirements should be publicly admonished. the challenge extends to creditors, too. at the bis we are discussing at the moment how the time - lags in the provision of data can be substantially reduced. in particular, the crises in south - east asia have demonstrated how important timely information on