as a reserve and invoicing currency and its relevance as an issuing currency on the the ecb provides a useful survey of the multitude of approaches to regional economic cooperation in the world economy ( ecb monthly bulletin 10 / 2004 ). international bond market is confirming this judgment. it is important to emphasise that the internationalisation of the euro reflects a market driven process and is no goal of the common monetary policy. thus, the acceptance of the euro in international markets is even more reassuring. despite these overall achievements, some have recently cast their doubts on the future of monetary integration in europe in the face of heterogeneous developments at the level of member states. and here i can only repeat myself. this line of argument neglects the basic empirical facts. the divergence in national inflation rates and output growth rates has not increased with emu. nominal convergence has not lead to real divergence and the heterogeneity within emu is by no means significantly larger than in a well - established monetary union, ie the united states. and it should be borne in mind – and this is one of the important lessons for countries engaging in a monetary union – that there are several national adjustment mechanisms to deal with idiosyncratic developments in a monetary union. these range from labour mobility, to flexible prices and wages to intra - union shifts in competitiveness. arguably, the most favourable condition for a monetary union would be a far reaching structural homogeneity of participating countries. but some instances of heterogeneity can realistically never be dismissed, and should not be. otherwise the fruits of specialisation, comparative advantages and interregional risk - sharing cannot be earned in full. thus, what is of the essence is that the member states forming a monetary union have a clear awareness of the “ rules of the game ”. ladies and gentlemen, with regard to the important gcc initiative, these issues are highly relevant. currently, due to oil production there is a high degree of structural similarity between the gcc economies. but differences in the amount of oil reserves will mean that economic heterogeneity will certainly increase in the future. the structural homogeneity of gcc countries has been accompanied by significant monetary convergence. widely unnoticed these countries have managed intra - regional exchange rate stability, low inflation rates and co - moving interest rates in a narrow range. fiscal convergence seems to lack behind the developments at the monetary frontier. and here, too, emu experience shows the

the last couple of years has been the move to european monetary union. the introduction of a common currency and common monetary policy among then eleven, now twelve, of the major industrialised countries of the world has been an economic endeavour unprecedented in economic history. it certainly marks the most significant step in the process of european integration. currently, it seems to be a widely held belief that in the aftermath of the latest developments the tide is out for future significant integration steps. but we all should keep in mind that from a broader historical perspective, european integration has never been a smooth, straight road towards closer cooperation. instead, periods of ambitious progress were followed by periods of setbacks. so, there is reason to believe that the undeniably difficult current situation for future european integration is itself creating the seeds for renewed initiatives and integration efforts. at least, this is what history in europe teaches us. but one thing is crystal clear. the visible tensions about the european constitution and the financing of the european union by no means hamper the proper functioning of emu. it is becoming more and more necessary to re - emphasise this point since some observers have argued to the contrary and doubted the sustainability of the current institutional framework for common monetary policy. however, this line of argument simply neglects the empirical facts. the eurosystem ’ s common monetary policy has delivered price stability and also well anchored longterm inflation expectations at a level consistent with the definition of price stability. the achievements of the single european monetary policy is deeply rooted in a few characteristics. among those, a clear objective and the supranational perspective in the decision - making process are key. in my eyes, these defining elements are central not only to the european project but also for other possible monetary integration efforts. well anchored, low inflation expectations have allowed us to deliver price stability under historically low nominal interest rates. this result is advantageous to all member countries involved in emu. it has promoted economic welfare for countries with a formerly less pronounced stability culture and the elimination of intra - emu exchange rate volatility has benefited all member states with both improved trade links and a deeper and more liquid financial market. just to remind us of the facts, even conservative estimates of the trade inducing effect of emu lie in a range of around 10 % of trade volumes or equivalent to roughly 1 % of euro area gdp. moreover, the functioning of emu is clearly visible in the growing international role of the euro. the euro ’ s role