trust. let me quote from him : “ the mistake that neo - classical theories make is to consider money a commodity. instead, it is really an institution that is held up by trust : trust in its future purchasing power and trust in the continued convention that payment is complete when money changes hands ( even if this is now something of a metaphor ) ”. trust is important not only as an end in itself, but also because it contributes to economic efficiency. this view, which is now shared by many economists and that curzio expressed in particularly eloquent terms, stipulates that the ultimate objective of institutions such as central banks is to reduce transaction costs. high public trust, by reducing transaction costs, raises economic efficiency and citizens ’ welfare. a high degree of trust by citizens is ultimately the most important safeguard of central bank independence in the long term. legal provisions for central bank independence are important, but not as important as public trust over the long term. 3 with a high degree of trust, central banks will be able to successfully deal with any potential risks for central bank independence stemming from the use of non - standard measures, for example. transparency and accountability are also important pillars of central bank independence and the ecb places a high value on them. together with delivering on the mandate, they also form the cornerstone of public trust in central banks. the ecb enjoys a high degree of independence in the international comparison, which is matched by stringent transparency and accountability requirements. indeed, we regard accountability as just “ the other side of the coin ” of central bank independence. looking ahead, central banks should get used to receiving closer scrutiny and in my view should not eschew even higher standards of transparency. it is not surprising that the use of new and non - standard tools attracts closer attention and sometimes even criticism. how do these considerations apply to the unique case of the euro area? the monetary union is an example of what curzio called a “ consortium regime ” where monetary sovereignty is permanently transferred to a supranational level. as a consequence, price stability is defined for the euro area as a whole. the challenge for the ecb is to maintain public trust in a multinational environment, in particular when there is a significant degree of heterogeneity in economic structures and preferences. trust is intimately linked to acting within the mandate. the ecb is operating and shall operate only within this mandate. a key part of the ecb ’ s aim to retain and build

mr heikensten speaks on the euro and european economic policy speech by mr lars heikensten, first deputy governor of the sveriges riksbank, the swedish central bank, at merita - nordbanken in malmo, sweden on 16 june 1999. the single european currency, introduced at the beginning of this year, marks a major change for the economic policies of countries in the euro area. the clearest example is, of course, the transition to a single monetary policy. the proper functioning of the monetary union in the long term presupposes that the new european central bank succeeds in making its policy and the euro understood and credible. important factors in this context are how the new central bank chooses to work, how monetary policy is continuously formed and how it is communicated to the general public and to markets. however, a well - constructed monetary policy and a central bank that acts wisely are not sufficient to ensure that the union functions in the longer run. if growth and employment in the euro area are to be as high as possible without jeopardising price stability, all the components of national economic policies will have to pull together. the fiscal, structural and labour market policies of the individual countries influence both the conditions under which the new central bank is operating and, to the highest degree, europe ’ s future prosperity. a framework exists for this joint effort. some common rules, for example the stability and growth pact, have been constructed to ensure that national fiscal policies do not pose problems for the union as a whole. there is also a continuous discussion of economic policy in various fora, of which the foremost are the ecofin council, made up of the ministers of finance and economy, and its subordinate committee, the economic and financial committee, which also includes representatives of the national central banks. the euro countries ’ ministers of finance and economy also meet in what is know as the euro 11 council. this framework has been finalised in principle but is being reassessed continuously in the light of new challenges. economic activity in the euro area this spring has been weaker than anticipated and this has been accompanied by growing disparities between national growth rates, budget balances and inflation. as a result, a number of central questions about how the monetary union functions have quickly come to the fore in the member states ’ discussions. although sweden is not participating in the euro area, developments there will affect us. this is a large currency area in our immediate vicinity with which we have