in response to the financial shocks, which would have greatly complicated the response to the crisis. second, the existence of emu, by supplying a common currency, a common liquidity policy across europe, a forum in which the issue of coordinating economic policies can be more effectively discussed and solved, is also crucial. in the immediate aftermath of the crisis, the ecb was quick and flexible to respond to the challenge posed by the drying - up of market liquidity. the eurosystem ’ s operational framework has proved adequate to allow rapid and far - reaching decisions and a timely management of the initial stages of the crisis, and flexible enough to deal with the evolving situation, smoothly incorporating any required amendments. we have increased the amount of liquidity provided, lengthened the maturity of operations, set up a facility to offer liquidity in dollars in agreement with the fed. in the last weeks, we stepped up our effort to normalize the dislocated money market, by deciding some further, and more profound, changes to the operational system. we have narrowed the corridor of monetary policy, shifted to a fixed rate tender with full allotment and enlarged the collateral that can be used by participants. we do not have a counterfactual, but i would argue that some of the pre - emu national systems would have been put to a hard test by the recent events. the existence of a common liquidity policy proved effective in avoiding that uncoordinated national initiatives open the way to cross - border arbitrage and to undesired spillovers that could have further amplified the turbulence. more generally, in the presence of a systemic crisis and with closely integrated financial markets, the appropriate policy response needed to be coordinated, not only across european borders, but also beyond the euro area. the unprecedented policy move decided jointly by the main central banks of the world on 8 october is a case in point. coordination on such a scale may have been very hard in the old days. finally, the worsening of the turmoil since the beginning of september posed new challenges to policy makers of the euro area, calling for prompt action. at first, the severity of the crisis induced some national governments to take autonomous steps to restore confidence, but this proved insufficient, signaling very strongly the need for a coordinated action at the european level. the agreement of october 12 on a concerted european plan of action setting the guidelines for interventions aimed at restoring confidence in financial markets has been a fundamental step in the management of

##ices. the evidence is that expectations have been confirmed in full. numerous empirical studies concur that monetary union has had a positive effect on the volume of trade within the euro area, although they disagree as to the extent, which is estimated between 5 and 15 per cent. a positive effect has also been observed on commercial flows outside the area ; this supports the theory that the adoption of a common currency, unlike preferential liberalizations, does not have distortionary effects on international trade. 2. 3. the trend in productivity is there a visible link between the adoption of the euro and productivity trends in the single currency area? this is a fundamental question on which no consensus has formed yet. from the second half of the 1990s, total factor productivity increased much faster in the united states than in the euro area, where instead its growth slowed sharply. the gap widened with the start of monetary union and has begun to narrow only recently : during the period it has averaged about one percentage point a year. the gap reflects diverging trends in the leading european economies : slower growth in france and germany and absolute decline in italy and spain, although our estimates indicate it has stabilized in italy in the last two years. the poor performance of total factor productivity accounts for much of the growth gap in labour productivity in the euro area as a whole. the adjustment of capital intensity has also slowed in the area as a result of heavier reliance on labour in the presence of institutional reforms making employment more flexible. to be sure, there are important issues concerning the reliability of statistical measurements. for example, some studies have shown that productivity growth in the united states might have been somewhat overestimated due inter alia to the incorrect measurement of gains in the terms of trade and tariff reductions. in italy, the bank of italy showed that the rate of increase in the export deflator was overestimated in the official statistics. this led to a revision of statistics resulting in an increase of more than 0. 5 percentage points per year in productivity growth in manufacturing in the period 1996 - 2005. but if the correction for statistical error can make europe ’ s productivity and growth gap vis - avis the united states less alarming than it seems on the basis of the original data, they do not annul the gaps. the fact that they have existed for a decade forces us to seek their causes in the structure of our economies. answering the question on the effects of the euro on productivity is as difficult as any counterfactual exercise.