klaus liebscher : the european integration : policies towards stability, growth and employment speech by dr klaus liebscher, governor of the austrian national bank, to the bertelsmann foundation, european forum alpbach, institute for public affairs, and the bruno kreisky forum for international dialogue, baden, 29 june 2001. * * * ladies and gentlemen, it is a great pleasure for me being with you this evening and let me first congratulate the organisers of this conference for having chosen a combination of two very important issues for discussion on european integration – labour markets and enlargement. i am pleased to share some thoughts with you from the view of monetary policy. the two elements of your conference title touch upon both the deepening and the widening of european integration. i may recall that, in the wake of the fall of the berlin wall, those two dimensions were often discussed as alternative strategies. however, today it seems clear to almost everybody that european integration has to proceed in both directions. the deepening of european institutions and the widening of europe's geographical extension are not mutually exclusive but rather dependent on each other. progress in one area does certainly give momentum to the other. the most important step in the deepening process of european integration – at least to my mind – has been the creation of economic and monetary union ( emu ). from a governor of one of the euro area central banks this statement will certainly not come as a surprise to you. although there was some scepticism or even criticism in the run - up to emu, not only european officials but also many observers outside the area have since confirmed that the transition to emu was taken successfully – including those observers who were originally very sceptical about the ambitious aims lined out in the maastricht treaty. and indeed, the list of preconditions for monetary union met in recent years is impressive. let me single out just a few of those points, without attempting to gloss over the challenges that lie ahead : · first and foremost, while inflation has come down to historically low levels we cannot be satisfied with the current inflation performance. at this point it has to be stressed that price stability was not only a precondition of monetary union but – even more importantly – is the prime objective of the independent eurosystem. thus, the european central bank will ensure that medium - term inflation is in line with price stability. we are confident that such a conduct of monetary policy will

an abstract notion to most of the citizens since it does not yet exist as a tangible transaction currency. the euro project will receive much more support once the common coins and banknotes have been introduced at the start of next year. the single currency will enhance price transparency and reduce transaction costs, both of which are likely to promote competition and full implementation of the single market for goods and services. but the euro will only be able to fulfil this expectations if it is a stable currency strengthened by a determined monetary policy, structural reform and wage moderation. last but not least, the introduction of a single currency is not just an economic project. it also carries a political, symbolic and psychological dimension of european integration. while the replacement of national currencies by a pan - european symbol is hardly changing the national identities of the member states, it certainly helps to promote pan - european thinking. perhaps one should recall at this point that integration is not only an objective by itself. what is at stake is sustainable economic and social development and ultimately political stability and – without sounding pretentious – peace. european integration will only be truly successful if it reaches out to the whole of europe. again it is the concept of stability orientation that urges us to complete european unification. according to the underlying rationale of enlargement, either we export stability to the accession countries, or we stand to import instability. if we manage the enlargement process successfully, this will also be conducive to our endeavour to guarantee stability for the whole euro area. such a mutual improvement is desirable in a very broad sense : political stability, financial market stability, macroeconomic and – in the particular interest of the eurosystem – price stability. the enlargement of the european union to central and eastern europe has arrived at a critical juncture. accession negotiations with ten central and eastern european countries and with malta and cyprus have advanced dynamically, especially during the past half year. difficult chapters – like " freedom of movement for persons ", " free movement of capital " or " environment " – have been provisionally closed with some applicants. furthermore, some of the six " helsinki group " countries ( which started negotiations only in early 2000 ) have made good progress in catching up, in the accession negotiations, to the " luxembourg group " countries. the european council in nice opened the door for a widening of the union, even if it did not fulfil all expectations. ratification of the new treaty is proving more difficult than