christian noyer : some ecb views on the accession process speech by mr christian noyer, vice - president of the european central bank, on the occasion of the central & eastern european issuers & investors forum, held in vienna on 17 january 2001. * * * ladies and gentlemen, i should like to thank the organisers for the opportunity to participate in this conference in vienna. this city has often been regarded, and rightly so, as a cultural bridge between the member states of the european union and the so - called candidate countries preparing for eu accession. vienna already provided a stimulating backdrop to the discussion of issues related to accession about one month ago. in mid - december 2000, the eurosystem ( i. e. the european central bank ( ecb ) and the national central banks of the 12 member states that have introduced the euro ) held its annual high - level policy dialogue with the central bank governors of accession countries'central banks on the occasion of the " vienna seminar on the eu accession process ". i am looking forward to continuing this discussion not only with my colleagues from the central banking community but also with financial sector participants. from the specific perspective of a central banker, i can appreciate the important role which you play in the transition process, as leading investors and corporations that are active in this dynamic part of europe. i am referring, in particular, to efforts to establish and maintain market discipline, to reinforce good corporate governance and business practices and - at the same time - to provide the highly valuable capital and transfer of " know - how " to these countries. transition has been challenging also from a central banker's point of view. central banks - as we understand them - did not exist in the accession countries before the start of transition, and a societywide consensus about price stability and the role of central banks was not an issue. at the outset of the transition, the conduct of monetary policy was complicated to an extent which might be hard to imagine for some of us in the ecb by far - reaching structural changes throughout the economy, the lack of a well - tested set of monetary policy instruments and, last but not least, high or even hyperinflation. against this background, the achievements of the central banks in transition economies have been most remarkable. assessing current economic developments in accession countries, and putting them into perspective as regards their respective starting - points, i am pleased to note the considerable progress that has been made over the past decade. undeniably,

be crucial to determining the results and the timing of the two subsequent steps towards the euro. allow me to elaborate on the three phases in more detail : 1. in the first phase - prior to eu accession - candidate countries need to step up all their efforts to comply with the so - called copenhagen criteria. as you are certainly aware, one of these criteria calls for the proper adoption of the acquis communautaire. this naturally also includes the provisions relating to economic and monetary union. in particular, legislation will have to be put in place that ensures the full independence of central banks. in this respect, i noticed with some concern recent episodes in some countries which confirm the need for more stringent legislation on central bank independence. analysing candidate countries'monetary policy strategies, i find it rather encouraging that they are, in most cases, increasingly similar to that of the ecb. centred on price stability, the conduct of monetary policy is built more and more around the use of indirect and market - based instruments to control liquidity conditions in the banking system. however, accession countries will need to further advance the process of bringing down inflation rates in the years to come. at the same time, they should not delay the much needed relative price adjustments within the economy which are part of the real convergence process. as for exchange rate regimes - i understand that this issue may be of particular interest since many foreign investors are present - there are no formal requirements in the pre - accession phase. each country remains responsible for the chosen exchange rate regime, and a plurality of approaches seems feasible. such a variety could also be observed with respect to existing member states prior to their entry into the eu. in brief, in this phase the consistency of economic policies and their appropriateness for the individual economic situation appear to be more important than the specific choice of an exchange rate regime. the eurosystem also has a vital interest in the proper functioning of financial and payment systems in accession countries. in the context of eu accession, we expect candidate countries to adopt eu legislation in the area of financial services, including those related to banking, insurance and investment firms. in this context, allow me to recall an expression used by that famous viennese economist, joseph schumpeter, who once contended that the only important institution in capitalism is the bank. the establishment of an efficient and competitive banking sector as well as a smoothly functioning capital market ensures the stability of financial systems and supports the convergence process in these countries