from within the union, with the imf focusing on monitoring conditionality. see kochpar, k., p. loungani and m. stone ( 1998 ) : “ the east asian crisis : macroeconomic developments and policy lessons ”, imf working paper 98 / 128. see cavallo e. a. and j. a. frankel ( 2008 ). “ does openness to trade make countries more vulnerable to sudden stops, or less? using gravity to establish causality ”, journal of international money and finance, volume 27, issue 8, pp. 1430 – 1452. see loong, l. s. ( 2000 ). “ post crisis asia – the way forward ”, bis william taylor memorial lecture, 21 september 2000. see heinz, f. f. and d. rusinova ( 2011 ) : “ how flexible are real wages in eu countries? a panel investigation ”, ecb working paper no 1360. see james, h. ( 2012 ) : “ making european monetary union ”, the belknap press of harvard university press. bis central bankers ’ speeches some will remember the imf annual meetings in 1997 in hong kong, when calls to create an “ asian monetary fund ” were judged incompatible with the imf ’ s universal mandate. 13 contrary to asia in the late 1990s, europe had the political infrastructure in place to sustain the sharing of sovereignty that makes mutual insurance mechanisms possible. this is not to say that all the discussions were easy, far from it, as might be expected in times of crisis. europe ’ s sense of commonality was, and still is, under severe strain. but the political framework was there to produce decisions, and most importantly, a legal framework was also there to implement them. the lesson from this is that regional integration, regional rule of law, and the sense of a common project are sources of stability. 14 in east asia, things have moved on since the late 1990s, with the chiang mai initiative multilateralisation. the g20 has taken stock of the asian and european experiences and acknowledged the relevance of regional financial arrangements. the road ahead for the euro area based on the lessons learnt from the asian crisis, what are the main challenges we face in the euro area? let me consider them one by one. restructuring europe ’ s financial sector to begin with, we need to reform europe ’ s financial sector. we have, so to speak, come to a crossroads in europe. in one

. the “ economic criterion ”, as the second of these criteria is termed, requires the existence of a functioning market economy as well as the capacity to cope with competitive pressures and market forces within the european union. the economic reasoning which lies behind this criterion is also quite straightforward and requires little elaboration. however, i should like to add that for the accession countries, while it is no doubt a difficult and sometimes painful task, fulfilling this criterion is an essential step towards creating a solid basis for future non - inflationary economic growth. and, finally, there is the third criterion concerning the adoption of the so - called “ acquis communautaire ”. this requires that a candidate country be able to take on the obligations of eu membership, including the adherence to the aims of political, economic and monetary integration. it is this last point which is of course most relevant to the eurosystem. eu enlargement and the eurosystem as i understand it, it has been decided that no new “ opt - out ” clauses, such as those negotiated by the united kingdom and denmark, shall be available to new member states. this implies that, when joining the eu, the new member states will have to comply with all of the requirements outlined in the acquis communautaire which relate to european economic and monetary union ( emu ). moreover, following accession, they shall each have to prepare themselves for the eventual adoption of the euro. thus it is clear that the accession process and the entry of new members into the eu will have deep and wide - ranging consequences for the ecb and the eurosystem. of course, meeting the maastricht convergence criteria is not a prerequisite for joining the eu. however, the introduction of the euro certainly puts some pressure on accession countries to make progress towards fulfilling the convergence criteria. in fact, we might consider their progress towards adopting the euro as part of a continuum, encompassing three distinct stages and crucial steps. these are : eu membership, participation in erm ii, and eventual adoption of the euro. the first of these steps requires implementation of the emu - related acquis communautaire. then, on the date of accession, new member states will join emu with the status of “ countries with a derogation ”. from this point onwards, they will be expected not only to treat their economic policies as a matter of common concern, but also to be committed to