gone are the days when european citizens had to worry about the purchasing power of their savings. this stability goes beyond the behaviour of prices. inflation expectations themselves have been remarkably stable, including during the recent period when oil prices jumped to new highs. this, by itself, illustrates the credibility achieved by the eurosystem. second, the ecb ’ s clear priority of price stability has reduced the risk premium incorporated in long term interest rates. bond yields have, consequently, been low by historical standards, a phenomenon which has substantially facilitated private investment. this in turn, will not fail to have a highly positive effect on growth. a third benefit of the euro is the removal of exchange rate risk and transaction costs for intra euro area trade. this has promoted trade integration among euro area countries without diverting trade with other countries. indeed, it appears that business cycles tend to be more and more synchronized over time, an evolution which allows for greater efficiency and sustainability of the common monetary policy. this shows that monetary union is a self sustaining process : real convergence is to some extent a result, as much as a precondition of economic integration. another benefit of the euro is the boost it gives to financial integration in europe. in many segments, european financial markets have reached the depth and liquidity which, up to now, were the preserve of dollar markets. this stimulates productive investment, helps in restructuring and, more generally, allows a better allocation of savings and sharing of risks. the current market turmoil is a clear test for this achievement and while the problems affecting the euro markets have been comparable to those affecting the other major markets, the strength of the euro shows, to some extent, that it has become a safe haven in our globalized financial world. the euro is becoming extremely attractive, as a vehicle, a transaction, an investment and a reserve currency. as you may know, as central bankers, we remain neutral as far as the internationalisation of the euro is concerned. we are neither encouraging, nor discouraging the process. but, as a citizen, i cannot help and feel proud of having one the two main currencies in the world. these achievements are the fruits of a long term process of reforms and credibility building, but they are not carved in marble. looking at the many challenges we are facing we could even wonder if monetary integration is really sustainable in the long run. my answer is positive and i am strongly optimistic about the future for the euro, because we have a clear agenda

providing both financial means and technological transfer. today privatisation is almost complete and one has to look for new engines pushing forward the catching - up process. currently, i see three main risks that have to be addressed as priorities by policy - makers : ( i ) ( ii ) ( iii ) increased financial vulnerabilities, in relation with fast credit growth and mounting external imbalances ; rising inflation pressures which hurt external competitiveness ; and the challenge of ensuring high future potential growth.. this third challenge belongs to the long - run as future economic developments will need to feed productivity growth beyond the dynamics of catching - up, through technological and production process innovation. it is however a present concern to the extent that recent signs of increasing labour market shortages and decreasing fdi inflows question the capacity to maintain gdp growth at the high levels recorded in the past. addressing these risks and challenges will require the conduct of prudent macroeconomic policies insuring short - term stabilisation, with fiscal authorities avoiding pro - cyclical loosening and generous spending policies, and monetary authorities preserving price stability and guaranteeing financial stability. however, macroeconomic policies alone are not sufficient to improve the long - term growth potential : they are aimed at fostering a stable and transparent business environment, but have to be supplemented by the implementation of structural policies designed to enhance labour market participation, labour mobility, competition in goods market, investment in education, r & d and infrastructure. it appears very clearly that the challenge of a stable and sustainable path for the catching - up process is closely interlinked with the challenge of a successful integration in the euro area. for that purpose, it is in the interest of the new member states themselves to be patient while accelerating structural reforms in order to meet both these challenges. euro area accession will come in due course as the well deserved reward for the efforts of each country in creating the conditions of its own long - term economic prosperity. i look forward to such accessions.