the maastricht treaty. they quite deliberately included in the treaty the famous convergence criteria in order to ensure that countries wanting to participate in the euro - area should have to demonstrate, before they were allowed to join, at least a minimum degree of sustainable economic convergence precisely in order to reduce the risk of divergent national monetary policy needs once the single currency is introduced. without that, the potential problems could be serious. the euro - member countries would have no possibility of adjusting either interest rates or their exchange rate independently, and they would have somewhat limited scope for independent fiscal adjustment because the stability and growth pact would constrain the size of overall public sector deficits. and alternative adjustment mechanisms - - such as the labour migration or fiscal redistribution that helps to alleviate similar regional problems within individual countries - - are not well developed at the level of europe as a whole - - nor are they likely to be, at least in the near future. so the risk is that the one size - fits - all interest rate could result in economic weakness and unemployment in some areas if the european central bank pursued a firm monetary policy or unwanted inflation in others if it were more accommodating. such divergent national monetary policy needs within the euro - area could result from differences in the cyclical position as between one country and another ; or from different fiscal positions, - 2although these, as i say, should be constrained by the stability pact ; or they could result from external shocks which had disproportionate effects on some countries as against others. they may be the more likely because europe starts from a position of generally very high levels of unemployment [ ranging from around 7 % in the uk, to around 10 % in germany, over 12 % in france and italy, and even more in spain on a consistent basis ]. i do not suggest that this urgent problem of unemployment can be directly addressed by differential macro - economic stimulus - - most commentators agree that it is rather the result of structural, supply - side rigidities and can only be effectively tackled by greater labour market flexibility. the worry is that the necessary structural changes will occur to varying degrees and at a different pace in different countries itself, resulting in different macroeconomic policy needs. this is why meeting the convergence criteria, in economic substance not just in some formal accounting sense, are crucially important. without genuinely sustainable convergence - - and i emphasise the word sustainable! - - serious tensions could emerge between different countries living with the single monetary

norman t l chan : a fascinating train journey speech by mr norman t l chan, chief executive of the hong kong monetary authority, at the cuhk ( the chinese university of hong kong ) business school master degree graduation ceremony 2015, hong kong, 21 november 2015. * * * professor michael hui, professor kalok chan, parents, graduates, ladies and gentlemen : 1. it is a great honour to be invited to attend today ’ s graduation ceremony. it is also a great pleasure to be back to cuhk, where i spent the most beautiful part of my life as a student. there were so many fond memories and i cannot tell you how much i have missed my campus life even though i have graduated for nearly 40 years. 2. my fellow graduates, today is a memorable and joyful occasion not only for you, but also for your parents, your family, your loved ones and your friends. you have all worked very hard and gone through many rounds of examinations and challenges before you can be here today on this occasion. you must feel very proud and wish to tell everybody that “ i have made it ”. my heartfelt congratulations to you all : you have made it. you have received a master degree that provides you with the knowledge and skills that are badly needed and sought after in the modern era of business and finance. so many of you may think that you have earned a train ticket for a smooth journey to the place you are destined to go : success. is it so? 3. i am not sure if i know the answer, but let me depict a different scenario for you to think about. let ’ s say you have a train ticket that would enable you to go through the admission gate of the train station and reach the train platform. when you are there you immediately realise that there are many trains waiting to depart. your ticket doesn ’ t really tell you which train you should board and the signs on the trains are not clear either. so you will have to decide which train you should get on, without knowing whether this particular train is indeed the right one that can take you to your desired destination. but this is not the worst part. when you get on the train, you find that there are already lots of people there and that there is no seat assigned to you. all the window seats have been occupied. so you have to struggle to find a seat for yourself. and this is not the end of the story. 4. after you have settled