, thus strengthening existing trends towards securitisation, as well as consolidation and / or disintermediation in this sector. securitised financial instruments are easier to trade internationally. furthermore, the unprecedented size of mergers and acquisitions within the euro area is encouraging the development of a large domestic market for corporate bonds. even a high - risk market segment comparable to the us “ junk ” bond market is likely to emerge within the euro area over time. it should be acknowledged, however, that a number of obstacles to the full integration of euro area financial markets still remain. separate national fiscal policies lead to discrepancies in credit and liquidity risk premia across the area. equity markets and securities settlement systems are still segmented. differences in financial market conventions persist. hence, the short - term liquidity and efficiency gains are smaller than a simple aggregation of national markets would suggest. most of the potential gains will only materialise fully over time. 3. the impact on cooperation at the global level the introduction of the euro also has implications for the international cooperation process. by reducing the number of key global players, the emergence of the euro area in principle simplifies international cooperation, as it facilitates the exchange of views and the formulation of common understandings on economic and financial issues. a more balanced relationship between the three major players - the united states, the euro area and japan - is helping to encourage each of these to take responsibility for contributing to a stable global environment. the european single currency may also foster the emergence of a tripolar monetary framework based on the us dollar, the euro and the japanese yen. policy coordination at the global level, however, is likely to continue to be of a non - binding nature in the future. following the collapse of the bretton woods system, larger countries have always refrained from committing themselves to formal exchange rate arrangements or other pre - defined rules. in this respect, the introduction of the euro has not changed the current picture. this does not mean that exchange rate stability is not desirable worldwide. in my view it is, not least because abrupt changes in exchange rates may generate calls for protectionism and for restrictions on capital flows, which eventually erode free trade and capital mobility. stable exchange rates, however, cannot be achieved by setting ranges of fluctuation for the major currencies ( target zones ). the key to sound international monetary relationships has to be found, instead, in sound domestic policies and institutions. efficient and effective international cooperation

been a substantial decline in the volatility of long - term interest rates as compared with that recorded in the past decade. in the 1990s, for example, the standard deviation of long - term interest rates ( monthly data ) was around 2 percentage points ; in the past six years, this measure has fallen to a little more than ½ a percentage point. it is striking that, while the volatility of long - term interest rates in the euro area was still around twice as high as that in the united states in the 1990s, the situation has reversed in the last six years, with euro area interest rate volatility now being below that observed in the united states. anchoring inflation expectations is not only important for low medium - and long - term market interest rates. it is also crucial for reducing macroeconomic fluctuations in response to economic shocks. there are some hints that the persistence of inflation in recent years has been lower than before. it is likely that this has resulted, at least partly, from the improved anchoring of inflation expectations which may, in turn, have led to a more forward - looking behaviour on the part of those setting prices and wages. less indexation of wages and prices to current and past inflation would tend to contribute to lower volatility of employment and output in response to macroeconomic shocks. importantly, the achievements in the area of monetary stability have not come at the cost of higher unemployment. on the contrary, the unemployment rate has averaged around 8½ % over the past six years and has therefore been more than one percentage point lower, on average, than in the 1990s. annual employment growth ( in terms of persons employed ) has doubled from an average of around ½ % in the 1980s and 1990s to slightly above 1 % since the start of the single monetary policy. average real gdp growth has been 1. 9 % in the past six years, which is close to the average of 2. 0 % in the 1990s ( 1990 - 1998 ). moreover, there are no visible signs of costs in terms of higher real macroeconomic volatility ; on the contrary, in recent years the volatility of some real variables has also declined relative to the averages observed during the 1980s and 1990s. for example, the standard deviation of quarter - on - quarter percentage changes of real gdp growth has fallen from around 0. 5 percentage point in the 1990s to around 0. 4 percentage point in the last six years. the volatility of employment growth has also fallen from over