of the single monetary policy. european financial integration is taking place gradually, with considerable progress having already been made. the degree of integration, however, varies across market segments, and integration is generally more advanced in those market segments which are closer to the single monetary policy. while the euro area banking markets for wholesale and capital market - related activities have shown clear signs of increasing integration since the introduction of the euro, the retail banking segment has remained more fragmented, leaving european firms and consumers unable to take full advantage of emu and the single market. see the introductory article of the special issue on the slowdown in productivity growth in the journal of economic perspectives 1988, vol. 2, no 4. the european commission recently estimated that the single market has brought about an increase of 2. 75 million extra jobs and an extra increase in welfare of €518 per head in 2006, corresponding to a 2. 15 % increase of the eu ’ s gdp over the period 1992 - 2006 ( see european commission, “ the single market : review of achievements ”, november 2007 ). ( iii ) supporting an innovative environment finally, to fully exploit productivity potential, the labour and product market reforms i have mentioned need to be accompanied by policies that support innovation and technological change. these include in particular measures to support innovation through higher investment in research and development, and policies aimed at improving human capital. first of all, europe needs more new and dynamic firms willing to reap the benefits of opening markets and to pursue creative or innovative ventures with a view to large - scale commercial exploitation. notably, it is new and smaller firms, rather than large ones, that are the job creators. an entrepreneur - friendly economic environment would imply less red tape for small and medium - sized enterprises, and help them to develop at home and abroad, as well as positive action to ease access to the finance they need. europe is significantly lagging behind in this field ; its venture capital financing, for instance, remains only a fraction of that in the us, relative to the size of its economy. finally, research and development as well as human capital make valuable contributions to tfp growth – a fact that has been known for some time. in 2006, r & d investment relative to gdp was only 1. 9 % in the euro area, compared with 2. 7 % in the us. while many member states expect to increase their r & d spending, the eu will fall short of its overall target of spending 3 % of gdp on r &

jean - claude trichet : how to preserve and consolidate the remarkable success of the euro and the performance of the european economy? speech by mr jean - claude trichet, president of the european central bank, at the brussels economic forum, brussels, 16 may 2008. * * * ladies and gentlemen, i would first like to thank the organisers very much for inviting me today to this “ economic and monetary union in europe : 10 years on ” conference. it is a pleasure to be here, and to share with you my views on the remarkable success of the euro and on how to preserve and consolidate that success by improving the performance of the european economy. as the european central bank is close to completing its first decade of existence and the euro will soon be ten years old, i would like to take this opportunity to pay a tribute to all those who contributed to this great achievement. the introduction of the euro has been recognised as a remarkable success. since 1999 the single currency has fully inherited the degree of credibility and confidence that was the privilege of the most credible national currencies before the euro. this has been in particular illustrated by the fact that the medium and long term euro market interest rates were at the same low level as the level observed for the most credible previous national currencies. in spite of a succession of very significant price shocks of oil and commodities, the average yearly inflation has been 2. 1 % from the 1st january 1999 up to the end of 2007. since the setting up of the euro 15. 7 million net new jobs were created, three times more than during the same number of years before the euro and around 2 million more than in the us during the same period. this success is even more remarkable if you refer to a large number of ex ante statements, some particularly blunt. i will not have the cruelty of quoting today those that had prophesised that the european single currency was impossible or that its introduction would be a complete failure, or that in any case it was impossible for it to be credible given the very nature of its construction. nonetheless, there is no place for complacency. price stability in the medium term has to be permanently ensured. credibility is not a given : any institution has to prove that it deserves it by its decisions and actions. regarding the functioning of the euro area economy, the success obtained in terms of job creation needs to be complemented and consolidated by continuing to implement courageous structural reforms aiming at increasing the flexibility of all markets,