recent meeting on november 8, the governing council decided therefore to cut rates by half a percentage point. it has lowered its key interest rates during this year by 150 basis points to 3. 25 percent. the escb has been assigned one main policy goal : keeping inflation in check. if possible without compromising price stability, it shall support general economic policiesthe reasoning behind this policy mandate is threefold. first, there is a purely economic reason. keeping overall inflation low is the best contribution a central bank can make to sound economic growth. furthermore, inflation tends to modify distribution in an unfavorable way. second, there is the well - known principle of reaching a bundle of policy goals best if each institution is assigned only one of the goals. and, third, there is the argument based on democracy theory : once an institution is granted independence, it should be given a clear mandate in return. a generally stable currency, and markets that trust the stability orientation of central banks, make for lower price increases at times of crisis. they also anchor inflation expectations at low levels. the larger currency area is able to cushion external shocks. in its brief history, the eurosystem has already dealt successfully with three external shocks and crises. we have seen the asian crisis in 1997 - 99, an oil - price shock in 1999 - 2000 and, most recently, the terrorist attacks. europe did not escape unscathed from all these events. however, the low level of turbulence within the euro area contrasts with sharper reactions to similar events in the period before emu existed. this means that we have withstood what has been regarded as the worst - case scenario for the new currency. the european currency area exhibits greater macroeconomic stability, to the benefit of all its citizens, and also to the benefit of the world economy at large. for this greater macroeconomic stability to become reality, convergence is of paramount importance. economic convergence is a precondition for the “ one - size - fits - all ” monetary policy really fitting all the regions in the euro area. a currency union, both stable and beneficial, needs convergence in all three respects : nominal, real and structural convergence. vi the european single currency fostered stronger economic integration by means of foreign direct investment. in 1999, world fdi flows, at ε 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 the size

is known that monetary stability alone will naturally not suffice? or is it to be possible to subordinate the target of monetary stability to other objectives ( such as boosting employment ), depending on the situation? ( then of course - as past experience has shown - there is a risk of forfeiting both in the end, i. e. of ending up with higher unemployment and higher inflation alike. ) the governments which negotiated the maastricht treaty opted for the first answer ; that is to say ( no more and no less ), for basically unpolitical money. assigning this mandate of an independent central bank is quite consistent, especially in a supranational context in which there is no room any longer for divergent national preferences. by their “ yes ” votes, national parliaments have unambiguously approved the treaty. after all, the independence of the european central bank is not shamefacedly concealed in the “ small print ”. it is at the very heart of the treaty. vi lord dahrendorf has criticised emu, saying that it is actually irrelevant to the great topics of the epoch and only diverts attention from the really important issues. profoundly though i agree with him about the existence and urgency of many great topics, as a central banker i find it rather hard to view emu as an irrelevance. what is true is certainly that europe is reaching the crossroads. and emu is clearly not a sufficient answer to everything. europe is faced with major challenges, namely with the three es : enlargement, employment and emu. enlargement mainly raises the question of how europe can remain operational and viable with 20 members and more. of course, i know that some experienced practitioners remain cool and argue as follows on europe : well, the reform of the institutions virtually failed even before any round of enlargement. and it went on for all that. that may be true in a certain sense. but it will result precisely in that often - deplored muddling - through, in which the question of what europe is doing, and how, is settled more by historical accidents than by rational economic decisions. and the eu must not suffer the same fate as the dinosaurs. the greatest challenge facing europe is doubtless the issue of employment - at least on the continent. especially since employment is not only a matter of the right deployment of the macroeconomic instruments - as in textbook economics. in germany, and also in some