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.

up till today, it is believed that the most effective and efficient financial system is one in which commercial bank money and central bank money coexist. 2. 1 money creation by central banks how then do central banks create money and influence the quantity of money in the market? in the first place, central banks provide central bank money in the form of banknotes. the issuance of banknotes entails a reduction in the liquidity of credit institutions, since credit institutions must deposit liquid means with the central bank against the withdrawal of the banknotes. banknotes and coins in euro are the only ones to have legal tender status in the euro area. secondly, central banks provide central bank money in the form of deposit liabilities. deposit liabilities are created through the monetary policy that central banks conduct, which aims at maintaining price stability. central banks maintain price stability through influencing the availability and growth of money in the economy which is operationally implemented through the transmission mechanism of the monetary policy instruments. the quantity of money in euro depends on the liquidity needs of commercial banks and eventually of the market participants like households, companies and the government. the eurosystem can influence the quantity of money in the economy in three ways. first, the eurosystem central banks conduct open market operations on the basis of article 18. 1, first indent of the statute of the escb 6. the most important tools are the main refinancing operations, which are regular liquidity - providing reverse transactions conducted with a frequency and maturity of normally one week 7. since 16 march 2016, the interest rate on main refinancing operations has been pegged at 0. 00 percent. article 4, ( 25 ) of directive ( eu ) 2015 / 2366 of the european parliament and of the council of 25 november 2015 on payment services in the internal market, and article 2, ( 22 ) of directive 2014 / 92 / eu of the european parliament and of the council of 23 july 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features. directive 98 / 26 / ec of the european parliament and of the council of 19 may 1998 on settlement finality in payment and securities settlement systems. committee on payment and settlement systems, the role of central bank money in payment systems, bank for international settlements, august 2003, 7. protocol ( no 4 ) on the statute of the european system of central banks and of the european central bank. other