labor and capital will ensure market integration. the european single currency has fostered stronger economic integration by means of foreign direct investment. in 1999, world fdi flows, at e 888 billion, were more than three times as high as in 1995. intra - eu fdi flows grew significantly faster over that period. in 1999, they were five times as big as in 1995. in addition, intra - eu direct investment has risen significantly since the start of emu. in the year 2000, it actually rose by 50 percent. today, intra - eu fdi accounts for one - quarter of global fdi. the fdi statistics show clearly, first, that economic integration in the eu is intense, and, second, that economic integration increased fast after the launch of the single currency. these observations are borne out by the trade statistics. about one - half of the external trade of the euro - area member states is intra - euro - area trade. viii it is in the financial markets that the benefits of a common european currency are to be felt most clearly. the implications of the euro are obvious : rising liquidity, deepening and widening of the money, bond and stock markets, reduction of transaction costs and abolition of currency risks. the euro speeds up financial market integration. correspondingly, the functioning of the european monetary union depends heavily on a high degree of financial market integration. its smooth functioning enables monetary transmission to work. progress in this field is tremendous, but more is yet to come. those parts of the european financial markets that are crucial to the transmission of the eurosystem ’ s monetary policy are already integrated to our satisfaction. the wholesale market for interbank liquidity in the euro area is now actually a single european money market. in addition, european banks are interconnected in a common payment - system infrastructure. and improvements to the euro - area - wide payment system are being undertaken. a few days ago, the plus bundesbank launched its new payment system rtgs ( real time gross settlement ), which improves security, reduces liquidity needs and expedites settlements of gross payments. through this system, about 8, 500 banks and credit institutions, including their branches all over the world, are accessible. the most impressive progress, in terms of integration, has been witnessed in the euro - area bond markets. yield differences among the government bonds of the different participants have narrowed from more than five percentage points before emu to some 30 basis points nowadays. the remaining spread is mainly

the european union is conditional on the fulfillment of the so - called " copenhagen criteria ". these comprise, first, " the stability of institutions guaranteeing democracy, the rule of law, human rights, and respect for, and the protection of, minorities ". this political criterion is already met by all negotiating countries. second, “ the existence of a functioning market economy as well as the capacity to cope with competitive pressures and market forces within the eu ”. all of the countries envisaging accession in 2004 are functioning market economies. the eu commission, in its recent report, also expects them to be able to cope with competitive pressures and market forces within the eu in the near term. and, third, " the ability to accept the obligations of membership, including adherence to the aims of political unification, as well as economic and monetary union ". the eu commission recognizes substantial progress, in candidate countries, towards the adoption, implementation and enforcement of the " acquis communautaire " – the community ’ s legislation. the copenhagen criteria define the common ground for the future eu. accession to european monetary union is conditional on " a high degree of sustainable convergence " ( art. 121 of the treaty ), as specified in the maastricht criteria. they stipulate nominal convergence in terms of inflation rates, sound public finances, long - term interest rates and exchange - rate stability. candidate countries can join emu two years after their eu accession, at the earliest, as they have to spend at least two years in the european exchange - rate mechanism erm ii. there are still considerable discrepancies between the candidate countries and the present eu member states in their macroeconomic and structural data. accession of the twelve candidate countries will increase the eu population by roughly one - third. nominal gdp, however, will rise by only five percent. the discrepancies today are more pronounced than they were in the previous three rounds of enlargement. the wealth gap between the current member states and the accession candidates is large. per capita gdp ( measured in terms of purchasing - power parity ) is only 44 percent of the eu average. furthermore, there is a striking degree of heterogeneity among the candidate countries themselves. per capita gdp measured against the eu average ranges from 24 percent ( bulgaria ) to 83 percent ( cyprus ). for convergence to be sustainable, it must be based on advanced economic and financial integration. the integration of the candidate countries with the eu runs