##s will then mainly be due to the differences in the standing of the issuers and the differing liquidity of the issues. higher demands will be placed on public sector national debt management because currency will no longer act as a “ screen ”. even now, the globalisation of the financial markets is calling for a widespread application of international standards. the euro is likely to encourage that trend. a reliable political regulatory framework and an efficient structure in the national financial markets will then become crucial assets in competing for capital that is in short supply. what implications do these developments have for the european financial markets? at present, there are still a large number of stock markets and futures exchanges in the european union which have a wide variety of market models and trading systems. as in the financial industry as a whole, the pressure of competition and advances in communication technology will lead to a process of adjustment and concentration. but the debate on the future of europe ’ s financial centres is also connected with questions concerning the set of instruments that the european system of central banks will have at its disposal. the bundesbank attaches great importance to the monetary policy strategy including the instruments belonging to it - being implemented in a way that leaves competition unaffected, and which does not discriminate against any financial centre in the euro area. we do not want any privileges for frankfurt, but we do not want any disadvantages either. along with the national central banks, which will carry the main weight of operational activities, the european central bank must itself have its own limited field of operations. that is because, from our point of view, competition between the stock market centres and trading systems which are not bound locationally is the best means of finding the appropriate financial market structure for the larger currency area. the greater breadth and depth of the euro market compared with the former national markets can also bring new business, of course. the euro - especially if it is enduringly stable - is likely to be particularly attractive for internationally operating demanders and suppliers of capital. the euro, however, will still first have to earn its position in the portfolio of public and private investors by competing with other currencies. in saying that, it ought to be beyond dispute that a euro which is weak inwardly in terms of its purchasing power will not be able to take a leading position externally. for that reason, too, safeguarding monetary stability is a perpetual challenge for the euro. v policy makers must now create confidence by taking credible decisions so that the general public and the

is a pressing need. short - term one - off actions or a relaxation of the maastricht fiscal criteria would, in may view, give the wrong signals. that would only encourage the disastrous illusion that the financial position is still bearable or that it will improve automatically at a later date. moreover, it would reduce the salutary pressure to reform exerted by the maastricht process. urgent adjustments would then probably continue to be put on hold - and place an even heavier burden on the future. an unsound fiscal policy and a strict monetary policy do not go together in the longer term. the distortions in the shape of economic costs, due to higher interest rates, employment and growth losses, may become very large. that is the reason why, under article 109j of the maastricht treaty, all the european countries must make efforts to achieve “ the sustainability of the government financial position ” beyond the starting date. in all probability, the supranational monetary policy of the ecb will, in the event of a conflict, find it difficult enough as it is to withstand the political pressure of fiscal, economic and pay - rate policies which remain national in europe. for that reason, 2. the independence of the european system of central banks enshrined in the maastricht treaty must not be infringed. by dispensing with the exchange rate, the participating countries will be doing without the mechanism which they were previously able to use to cushion differences between countries in terms of inflation, productivity or the growth of government debt. in the euro currency area, there will be no comprehensive financial adjustment scheme in support of economically weaker countries. the countries lack the money and probably the willingness for large - scale transfer payments. the burden of adjustment in the case of changes in productivity and demand will lie almost exclusively with national labour costs. wages and wage - related levies must be geared to differences in productivity, otherwise unemployment will easily occur. if wages are not sufficiently flexible, however, there will be a great danger that pressure for actionism will soon be directed to the single monetary policy. that is because experience teaches us that policy makers easily fall prey to the temptation to side - step the pressure of structural problems by means of a little extra inflation. given differing trends between countries, however, that could also easily lead to conflicts between them. in germany, the bundesbank has always been able to rely on its anti - inflationary