zdenek tuma : consolidation before expansion summary of a speech by mr zdenek tuma, governor of the czech national bank, for the conference on " modernising germany - gaining competitiveness for europe ", berlin, 1 june 2006. * * * do we really face the dilemma of choosing between consolidation and expansion? we should look at the integration process from both the political and economic perspectives. from the economic point of view, deepening and enlarging are both primarily spontaneous processes, but this does not necessarily hold for the political aspect. unfortunately, these two perspectives are often confused, which can lead to misleading conclusions. let me consider the economic perspective first. as a recent eu newcomer i can confirm that we observed spontaneous integration with the eu well before the timing of our accession had even been mentioned. therefore, i do not expect the expansion of the eu to end just because there is a lack of political will for enlargement. market forces will keep the surrounding countries “ in the game ”. the political and institutional framework can encourage or discourage this process, but it can hardly stop it. on similar ground, the deepening of the already integrated area is quite spontaneous from the economic point of view. for instance, we are seeing dynamic integration of the financial architecture and a growing number of cross - border mergers in both the financial and non - financial sectors. here, too, an appropriate institutional framework would help, but the consolidation process is going on even without it. therefore, my first conclusion is that from the economic perspective the dilemma between deepening and enlarging is rather imaginary. in fact, both these processes are going on around us at every moment, and the authorities have a limited ability to choose between these two aspects of integration. the political dimension makes the question much more complex. despite the aforementioned conclusion that economic integration is relatively independent of political will, an appropriate institutional framework is undoubtedly important for the pace of integration and the future shape of european markets. but politicians are caught between their vision of an integrated europe and pressure from many of their voters to defend their current positions. their inability to explain the benefits of integration to the electorate is a source of frustration and puts limits on any further political deepening and enlarging of the more and more economically integrated area. this may lead to a temptation to use the argument of an imaginary choice between deepening and enlarging. but businesses will not ask politicians for permission to move to balkan countries or turkey, or to continue concentrating

zdenek tuma : euro adoption, acceding countries and financial stability speech by mr zdenek tuma, governor of the czech national bank, at the imf conference, prague, 3 february 2004. * * * ladies and gentlemen, dear colleagues, it is my pleasure and honour to address you during this high - level conference which we co - host at the czech national bank. today we had an excellent opportunity to exchange views on the preconditions and implications of adopting the euro in the acceding countries. these debates will provide us with a springboard for our discussions on euro adoption strategies, which are scheduled for tomorrow. even though the actual enlargement of the euro area still lies in the relatively distant future, the acceding countries have to be prepared well in advance. that is why last year was marked in most acceding countries by co - operation between central banks and governments to define their joint positions on the euro. many of the acceding countries subsequently published euro area entry strategies. in these documents they discussed the potential benefits and challenges of adopting the euro and outlined a roadmap for their entry. according to the traditional cost - benefit framework, one can expect that the acceding countries, which are mostly small open economies, will derive numerous benefits from adopting the euro. these benefits involve, among other things, a reduction of foreign exchange risk, and the elimination of the danger of exchange rate turbulence and crises. euro area entry provides an attractive solution to the “ fear of floating ” dilemma for these countries. the expected benefits should in the long run outweigh the costs associated with giving up national monetary and exchange - rate policies as adjustment tools. today, however, i do not want to focus too much on this traditional optimumcurrency - area debate. instead, i would like to highlight another aspect of euro adoption, the implications of euro adoption for financial stability. by reducing exchange rate risk and currency turbulence, monetary integration provides easier and safer access to foreign capital. therefore, it can be expected that it would lead to more efficient allocation of resources, faster real convergence, better inter - temporal consumption smoothing and more efficient diversification of risk. in this sense, euro area entry augments the benefits of international financial liberalisation. at the same time, it reduces many of the financial stability costs associated with the liberalisation process, such as currency crises, currency mismatches in the economy, and high exchange rate volatility. i would like to emphasis