way trend. recently, the markets do seem to have become more realistic once again ; they are no longer considering only the good news about the dollar and the bad news about the euro, as was the case at one time. the euro exchange rate is beginning to recover ; the extent of the recovery will depend mainly on the convergence of growth rates on either side of the atlantic and continuing consolidation of the european economies. of course, the improvement in the euro exchange rate should preferably be based not on thetransient - weakness of the american economy but on the lasting strengthening of the european economy. fortunately, the structural reforms are gaining ground in europe : new technologies are steadily making progress ; competition on the markets has increased and labour markets are becoming more flexible, even if such a statement is taboo. now that government finances are also being put in order, scope is gradually being created for reducing the fiscal and parafiscal burden in europe. that is important because the burden is currently much higher in europe than in the united states. it is time to conclude. internationally, just as the notes and coins are about to be introduced, 2001 could become the year of the euro. the euro is only two years old, so it is still in its infancy and needs to grow up, but it is already sturdy and indeed looks older than it is. as we have seen, it has helped to boost growth and employment in europe. it has proved itself on the financial markets, but many people still see it as a virtual currency because it does not yet exist in tangible form. today the official interest rate stands at 4. 75 p. c. ; inflation ran at 2. 7 p. c. during october 2000 and 2. 9 p. c. in november for the euro area, and was probably lower in december. on its third birthday it will at last take on the form of notes and coins, which will circulate from helsinki to lisbon via bruges. europeans will then become fully aware of the fact that they have a common currency, which is already the second most widely used currency in the world.

##m interest rates – determined by the markets on the basis of the inflation outlook – did not increase in 2000. monetary policy has kept inflation down but without destroying growth. even now that they have been raised, the interest rates of the european central bank cannot currently be regarded as damaging economic growth, because real short - term interest rates ( nominal interest rate minus inflation ) are now no higher than when monetary union was launched at the beginning of 1999 ( during the first quarter of 1999 the key benchmark rate was 3 p. c. and inflation in the euro area was 0. 8 p. c. ). the euro ’ s internal value ( its purchasing power ) has been safeguarded by the actions of the ecb, but we must admit that the trend in its external value has been less satisfactory. the relatively weak exchange rate of the euro has naturally favoured european exports, but that is a short - term advantage, because an economy ’ s competitiveness needs to be based on factors other than a weak currency. furthermore, it has increased the cost of our imports. we have realised that as oil prices have risen, so that is a factor which can push up inflation. and if the exchange rate continues to weaken, that could in the long run impair savers ’ confidence in this new currency, both in europe and beyond. there was a time when one dollar cost over 3 marks and so the mark has been weaker against the dollar than the euro. and at that time no one ever viewed the mark as a bad currency. but it is true that the mark could boast of a long history and that no one in that instance doubted that the international currency fluctuations would change direction one day. the differences in economic growth and interest rates between the united states and the euro area could to some extent explain the depreciation of the euro against the us dollar. but last summer we, the members of the governing council of the ecb, repeatedly said that the fall had become excessive and unjustified. we also said that intervention on the foreign exchange markets could not be ruled out. by actually intervening we gave the markets two signals : first, that even if the internal value of the euro is the only objective to which it puts a figure, the ecb is not indifferent to the euro ’ s exchange rate ( and to demonstrate that, actions speak louder than words ) ; also, it should be clear that this rate does not necessarily move in one direction only, that it is not a one -