mandate. in the case of equities, i believe that we cannot hold a strong conviction in either regard. the link between overnight reserves and prices of equities is too remote and indirect, and the impact of equity prices on the balance of aggregate supply and demand is too uncertain, for those prices to be a target of policy. to be clear, this is not an argument for never considering prices in asset markets when determining how well we are likely to do in achieving our goals. monetary policymakers follow developments in the equity and other asset markets as part of the process of evaluating and forecasting economic conditions. that is, the values of equity claims affect spending decisions and help forecast economic activity. but, in that regard, a similar role is played by many other important determinants of spending, including long - term interest rates, the foreign exchange value of the currency, the government's fiscal position, and economic activity abroad. we can employ our one instrument to temper or augment the net effect of changes in these factors on spending and production, but we do not have the tools to respond to each individually. our tool is most efficiently deployed to adjust overnight interest rates. there is a more general principle at work here. no doubt, the balance sheet of the federal reserve is large and the attention paid to our pronouncements intense. nobody would deny that central banks can be quite powerful and that monetary policy works, over time. but in the scheme of things, a central bank's ability to smooth asset prices ( if it wanted to ) or to buffer shocks to spending or production is somewhat limited. the textbooks teach that monetary policymakers can vary interest rates to offset fluctuations in aggregate demand. the reality is that when the shortfall in desired spending is large or arises quite quickly, as was the case last year when businesses slashed their investment plans in light of a perceived overhang of capital, the initial monetary policy offset can be only partial and not necessarily synchronous. eventually, of course, monetary policy does work ; but the lags continue to be unpredictable and both the level of rates and the time required for policy to have the desired equilibrating impact depend greatly on the force of the macroeconomic instability that must be confronted and are not knowable at the start of a cyclical event. similarly, the central bank can meet elevated demands for liquidity during times of crisis, but the private sector cannot look to the central bank to eliminate all risk, just

the institutional reform work within the european union is approaching a stage which makes the union ready for enlargement. i am pleased to hear that denmark, now holding the eu presidency, has the firm intention to continue this process and to tackle some of the core issues during the second half of 2002. my own institution, the osterreichische nationalbank has been an active partner for central banks in transition countries since the very start of transition. initially, our contribution to institutional development consisted in technical assistance. gradually, this has evolved into technical cooperation and finally into working relationships. by now, these relationships have become integrated in joint efforts of the whole european system of central banks. being a member of this system, my bank has complemented its bilateral relations by actively promoting a dialogue between the eurosystem and the central banks of the accession countries. in addition, i would like to point out that those of you who are interested in getting more information about all these issues may consult the most recent editions of the " focus on austria " as well as the " focus on transition " of the oesterreichische nationalbank, whose general theme ties in with the topic of this year's vienna international summer university. both publications provide a number of interesting and high - quality papers related different aspects of eu enlargement. conclusion in concluding, i would like to reiterate that emu and the euro are in many respects europe's strategic response to global competition and the associated challenges it poses. emu underpins europe's role in the world and strengthens the position of our economy in the face of growing international competition. emu triggered not only monetary convergence, but also the real convergence of our economies. structural reforms geared toward efficient and flexible product, capital and labor markets, as well as sounder fiscal policies have made our economies more shock - resilient and will ultimately increase our non - inflationary growth potential. this positive and stabilizing influence is not only felt within the euro area, but also in the countries that have close ties to the euro area, such as the countries currently conducting accession negotiations with the eu. thus, with the euro as a stable anchor, emu creates a zone of stability that is even larger than the euro area itself. in this way, the euro is a catalyst for the future political and economic integration of europe. thank you for your attention!