taking into account what could be avoided. within the euro area, the monetary union has kept member countries from being exposed to harmful intra - european exchange rate tensions of the type that many countries used to suffer when external shocks occurred. it has become quite obvious that the countries constituting the euro area are protected from negative shocks much more comprehensively now than was possible under past regimes. indeed, major external developments in recent years, like the bursting of the equity bubble, the repercussions of the terrorist attack on september 11, 2001 and the more recent substantial depreciation of the us dollar that has resulted from the sizeable imbalances in the us economy, otherwise might have led to phases of instability within the european economy. instead, they could be weathered within a stable framework. during the past five years, the eurosystem successfully achieved its primary objective of maintaining price stability over the medium term. despite some years of rising world energy prices combined with a strong appreciation of the us dollar, the eurosystem managed to achieve low inflation and low interest rates, which will ultimately stimulate further investment and contribute to sustainable growth in the euro area. thereby, the euro will contribute to more balanced global growth and to more stability in the international financial system. the current state of the european economic and monetary union, its “ stability architecture ” and its developed rule - based “ stability culture ” truly represent a culminating point in the process of european integration. indeed, over the last half century, europe has followed an impressive path of voluntary integration of nations, so far unparalleled in history. economic integration, in particular, was successively deepened. moreover, in parallel to the process of deepening the integration, the european union was successively enlarged. at present, we are at the threshold of a further historic enlargement of the european union. the accession of ten new member states, scheduled for may 1st 2004, is of great political importance and also has non - negligible economic implications. looking into the future, there are two main challenges for the european economic and monetary union. the first challenge consists in strengthening the hitherto developed architecture and culture of stability, the second in successively integrating the incoming new member states, and both challenges are certainly inter - linked. regarding the “ stability architecture ”, the legal fundaments of the economic and monetary union have to be transposed appropriately into the treaty establishing a constitution for europe, in order to ensure that the essence of the stability orientation of the economic and

jean - pierre roth : switzerland as an industrial location and national bank policy summary of a speech by mr jean - pierre roth, chairman of the governing board of the swiss national bank, at the europa forum lucerne, lucerne, 27 october 2003. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * in a high - wage country such as switzerland enterprises can only maintain their position in the face of international competition by a process of ongoing innovation. the resulting structural change in the direction of highly technological and increasingly productive economic sectors is also a prerequisite for strong economic growth. in an international comparison, however, switzerland ’ s growth is poor. this weak perfomance in terms of growth highlights the need for action in economic policy. monetary policy cannot, however, fulfil this role. the primary task of monetary policy is to ensure price stability. price stability is an important locational advantage that switzerland has to offer. moreover, monetary policy can also contribute to stabilising the economy and warding off undesirable exchange rate shocks. it is, however, not in a position to bring about a sustained improvement in economic growth. the result of such an attempt would merely be economic overheating with the threat of a subsequent slide of the economy into recession. lasting effects on economic growth may, by contrast, emanate from education policy, research policy, policy on foreigners and fiscal policy. weak growth in switzerland, however, may be explained mainly by the conspicuous productivity gap between the innovative export sector and the domestic sector set in its traditional structures. the reason for this lethargy of the domestic sector is a dense network of regulations which limit competition and obstruct technical progress. the result is an excessively high domestic price level from which not only consumers but also exporters suffer. growth - promoting measures must therefore aim primarily at wedging impediments to competition in the domestic sector.