for the launch of the euro may help stabilise expectations in the financial markets. but of course, the rate cut cannot solve the severe structural problems in most of the euro countries. this is particularly true of the structural problems on the labour markets. iv naturally, it is not only europe that is suffering structural problems and, therefore, facing tough challenges. – 5 – to a large extent, it was structural problems occurring in the monetary and banking sector which played a major calamitous role in the outbreak and course of the regional crises. • many of the countries affected had excessively rigid exchange rate pegs. • many of the countries affected placed their own monetary policy too much at the service of these problematical exchange rate pegs. • many of the countries affected have structural deficiencies in the area of financial market supervision, in particular. these structural problems in the monetary sector have to be solved first and foremost through suitable policy measures in these countries themselves. how else could these internal structural problems be solved than • • • • through a confidence - building economic policy, through a greater measure of realism in the exchange rate pegs, through a stability - oriented central bank policy, and through an overhaul of the financial sector and an improvement of banking supervision? naturally, international cooperation can also help, but not so much through currency arrangements like the euro as through strengthening the overall functioning and viability of the financial markets. this entails above all • improving international cooperation in the field of supervision, • involving private sector creditors in the task of overcoming crises, and • improving the transparency of the financial markets. all this will sharpen the markets ’ risk awareness and strengthen their functioning and viability. but considerable structural problems exist in the industrial countries, too. in the usa the already low private saving ratio has fallen further in recent years, actually showing a negative ratio of late. despite the country ’ s balanced budget, the imbalances in foreign trade have not therefore been reduced. and in most of the euro countries unemployment remains too high. the euro will not be able to solve this problem on it own. instead the euro requires flexibility and competitiveness in the real economy. it is the politicians who must tackle these internal structural problems. in the longer run this is the best contribution that can be made towards achieving sound financial markets and a prospering world economy. v boldly undertaking the necessary reforms in the euro area will at the same time prepare the ground for sustained favourable growth and employment prospects.

. • and the political framework for integrating the single currency is a rather loose structure. the euro will have to cope with this as best it can. – 2 – for the goal is not merely to ensure that the euro is stable at the beginning. the goal is to ensure that the euro remains stable over the long term. and in the long term it is highly probable that the euro will need a stronger political underpinning. ii it is gratifying that the financial markets already seem to have largely accepted the euro. at any rate, the euro has passed its first test. the markets apparently have confidence in the preannounced exchange rates. so far there have been no marked tensions between the exchange rates of the future participating currencies. and the euro has already begun to show the first benefits. in the context of problematical developments in the financial markets which in some cases reached crisis - like proportions, the euro has acquired the reputation of a safe haven – even before the actual launching of monetary union – which has led to correspondingly low capital market rates in the future euroland. none of these things should be taken for granted. they are the result of • the rigorous stability orientation of the maastricht treaty, • the large degree of convergence that has already been achieved in the monetary stability policies of the central banks, • the careful preparatory work, and • the determined efforts that have been made to date to achieve greater convergence in fiscal policy, too. the safe haven function which the euro area has performed so far clearly demonstrates that the introduction of the new currency is undoubtedly a ‘ global event ’. and a lot of hopes are being placed on the future international role of the euro. clearly, the enlarged financial market in euroland will result in a wider range of products and a broader choice of investment opportunities. to what extent these greater opportunities will actually be used – especially by enterprises – depends on other conditions as well. these include the legal framework laid down by the eu and by the national parliaments of the countries concerned, the different traditions in respect of financial market structures and also questions of taxation. it remains to be seen just how quickly traditional financial market structures move closer together. and another thing which remains to be seen is the use to which enterprises will put the enlarged capital market. for example, will there be a tendency towards greater concentration as firms seek to exploit ‘ economies of scale ’ in euroland? and what about the other question which central bankers are often asked in