in circulation in germany and such shares. are, if anything, likely to be even smaller for the other countries of the euro area. inflationary policy only harms the development of the economy. or to put it another way : price stability is the best precondition for sustained growth. 2. the benefits of the paradigm change that took place in the late seventies and the early eighties are now becoming apparent. inflation has been largely brought under control and, in most industrial countries, it is more or less already possible to speak of price stability. that does not mean, of course, that we central bankers have to fear that we shall soon become superfluous. price stability is a good that has to be earned every day anew - vigilance is therefore still the prime necessity for monetary policymakers. 3. but in another respect, too, there is no cause for us to be complacent or satisfied with ourselves and take a back seat. new challenges are on the horizon. i see no occasion for pessimism, however, when faced with the advancing globalisation of the financial markets and intensifying competition in the financial sector : they may call for flexible adjustments and changes but are not a fundamental impediment to an effective monetary policy. established economic relationships may change or become looser, but this will not prevent monetary policymakers from being effective in performing their task of ensuring the internal stability of their own currency in the future as well.

an approach unambiguously geared to price stability. at the same time, the set of monetary policy instruments was brought more closely into line with market conditions, and interest rates in the financial markets as well as cross - border capital transactions were liberalised. this sea change in monetary policy was accompanied by a general reorientation of economic policy which compelled the government to concentrate on its primary functions, thus creating greater scope for the development of market forces. this reorientation of monetary policy has not been without success. during the past twenty years, inflation has been reduced to a much more acceptable level in the industrial countries, thus making it possible to speak at least virtually of price stability in the majority of countries. over the past few decades there has arisen an international consensus about monetary policy that is geared to price stability. the evident success of such a policy in the nineties paved the way for a single monetary policy in europe. as a result, with the start of european monetary union at the beginning of 1999 the conditions for tension - free broad - based growth have improved. the experience of german monetary policy and that of other central banks has taught us that, besides the unambiguous commitment to the objective of price stability, the independence of the monetary policy decision - makers is a basic precondition for that success. independence means, first of all, that the central bank is independent of the government in formal terms with regard to the deployment of its monetary policy instruments. the maastricht treaty provides the european system of central banks with an even greater degree of independence, in fact, than was stipulated earlier by the legislators of the bundesbank act. the central bank ’ s formal independence of the government has to be accompanied by material independence which ensures that the monetary policy decision - makers can take their decisions in isolation from the interests of the government. for that reason, the agreements on european monetary union provide for terms of office for the ecb ’ s management that are of adequate length and rule out premature dismissal. furthermore, the independence of monetary policy in europe is protected by the maastricht treaty prohibiting the ecb from financing budgetary deficits and by the fact that the exchange - rate arrangements of the governments are clearly subordinated to the primary objective of price stability. after roughly 18 months, in which responsibility for monetary policy has resided with the european central bank, it is undoubtedly still too early for an overall assessment. however, the fact that the changeover to the euro took