functioning of the stability pact will, above all, be the countries ’ ability and willingness to abide by those rules on a sustained basis. a monetary union, under the maastricht treaty, therefore needs a large measure of common “ stability culture ” in all participating countries. and another point : the euro can function as a depoliticised currency only in this specific form. the ultimate monetary target, i. e. monetary stability, must not be subordinated on a discretionary basis to other goals. and monetary policy must be conducted by a politically independent central bank. that may be considered in some quarters to be an overly german postulate. but in my view this is implied not only by the requirements of a lastingly stable currency, but also by the logic of a monetary union comprising several countries. for if one country subordinates its own currency to political objectives other than stability, that may have unpleasant consequences for other countries, given globalised financial markets. but still, one could live with that. if, however, eleven countries try subordinating their common currency to their respective primary political objectives, things will really get pretty chaotic in the union. that way, the euro would gain the confidence neither of the citizens nor of the financial markets. the upshot would, rather, be all too likely to be permanent political conflict. the euro must not come under the influence of the domestic interests of individual countries. monetary policy must be geared to the situation in the euro area as a whole, taking responsibility for maintaining stability of the common currency. some of the incidents in brussels during the first weekend in may may in this context have been a timely warning, and a lesson to be learned by all. vi there can be no doubt that monetary union implies the irreversible loss of the sovereignty of the participating countries in the monetary sphere. some loss of identity and of the symbolism of a nation state will of course also be associated with giving up the national currencies. in germany, this also means the loss of a symbol of economic reconstruction after the war. monetary union thus reinforces an overall trend towards global economic integration, especially also as a consequence of the global financial markets : the nation state forfeits some of its freedom to shape events. in some countries and some quarters there are also fears about the immediate forfeiture of sovereign rights, as in the case of the currency, and also about an uncontrolled dynamic integration process which will - automatically, as it were

regimes of the twentieth century found it impossible to dispense entirely with banks, even if, as a result of fantastic accounting and rotten economic policies in general, the banks mostly ended up bankrupt and depositors penniless. the essential raison d'etre of banking is that an economically advancing society needs effective intermediation between savers and borrowers, and mechanisms for making payments efficiently. as already noted, the initial basic intermediary function of providing deposits and loans expanded subsequently into the organisation of alternative channels of intermediation such as bonds and equities ( these activities may be conducted in some jurisdictions outside the narrowly defined banking sector, but the distinction is not material in the present context ). although it is human nature for savers to complain that the returns are inadequate, and borrowers that costs are extortionate, in the marketoriented economies competition in financial intermediation has mostly been quite intense, and most of us would probably agree that this has worked to the increasing benefit of customers on both sides of the balance sheet. meanwhile, the provision of payment services has developed markedly at both the wholesale and retail levels. banks are at the centre of this activity, typically supported by the central bank as ultimate provider of liquidity. in fact, whereas many other types of institution may nowadays be involved in lending money or providing avenues for savings, banks themselves remain firmly at the core of the payments system. a sound and efficient payments system is acknowledged to be a prerequisite if an economy is to realise fully its potential. banking facilities have become so much an accepted and necessary part of life that access to them is sometimes regarded as an absolute and unconditional right, in the same way as is argued for universal education or health services. this has been a topic of debate in hong kong recently, in the context of likely changes to savings rates and to fees and charges in the light of the final deregulation of interest rates next week. as a general rule, however, businesses such as banks should be allowed to determine their own strategies in the light of market forces, although the authorities may claim a legitimate interest in ensuring that those market forces do indeed function competitively. one bank may decide that the provision and encouragement of the widest possible access to its services fits well into its business plan ; another may decide otherwise. in the rather unlikely event that insufficient basic banking services are available to some section of society, the case may be argued for official intervention. but one