jean - claude trichet : the international role of the euro speech by mr jean - claude trichet, president of the european central bank, delivered at the “ schierensee gesprache ”, 14 may 2004. * * * introduction it is with particular pleasure i address this distinguished audience. today, i will look beyond the confines of the single currency area. i will even go beyond the borders of the baltic sea region to which minister - president simonis has just referred, as i would like to share with you some thoughts on the international role of the euro. when the euro was launched on 1 january 1999, the european central bank ( ecb ) assumed responsibility for monetary policy in the euro area - the second largest economic area in the world after the united states. the eurosystem subsequently became the issuer of the second most widely used international currency, after the us dollar and ahead of the japanese yen. this outcome was mainly a reflection of the legacy of the 12 former national currencies which the euro replaced. since the euro came into being, its international role has grown in a gradual but steady way. in that vein, i will first review the main developments in more detail, by characterising the key features of the use of the euro by non - euro area residents. i will then turn to the role of the euro and the eurosystem in international cooperation on currencies. this role is also reflected in our policy position vis - a - vis the internationalisation of the euro. the ecb sees the internationalisation of its currency beyond the borders of the euro area as a market - driven process. at the same time, the ecb also analyses developments closely, as we are keen to know how our currency is used and by whom. this applies in particular to the use of the euro in countries located in the immediate vicinity of the euro area, including the new eu member states. as you know, these countries are expected to adopt the euro in due course once they are deemed to have fulfilled the conditions set out in the eu treaty, and i will briefly comment on this process in my conclusion. the gradual development of the international role of the euro let us consider first the main developments in the international use of the euro since its inception in 1999. to briefly sketch the main traits, i will follow the standard approach that builds on the functions of money and distinguishes between the varied use of the euro outside the euro area, by public authorities on the one

demand and value added in manufacturing are likely to contribute significantly less to growth than in the previous quarter. as a result of the comprehensive revision of the national accounts, the reported figures for previous quarters are higher, and therefore gdp growth for the current year should also be somewhat higher than we assumed in september, by 1. 5 – 2 %. however, the underlying economic momentum has not changed. for next year we expect to see gdp growth of about 2 %. under this assumption, the underutilisation of economic capacity will decline only gradually. we are also expecting only a modest recovery on the labour market. monetary and financial conditions i will now turn to monetary and financial conditions. after a long period in negative territory, inflation has been hovering around zero for over a year. the minimum exchange rate has prevented deflationary developments, but inflation still lies towards the bottom of the range that we equate with price stability. moreover, according to the available surveys, medium - term inflation expectations have fallen steadily in recent years. yet, at around 1 %, they are still close to the long - term average inflation rate. interest rates, too, have remained very low across all maturities in the past few quarters. mortgage rates have declined further, reaching a new low in october. government bond rates have also fallen to new lows. my colleague, fritz zurbrugg, will discuss developments on the financial markets in more detail. despite falling mortgage rates, mortgage lending growth slowed again. at the same time, real estate prices continued to rise. however, as in 2013, price momentum is weaker than in previous years. this suggests that the measures to contain developments on the mortgage and real estate markets are starting to have an impact. yet the imbalances that have built up on these markets in recent years remain the same. it is still too early for an all - clear. the snb will continue to monitor the situation closely. my colleague jean - pierre danthine will discuss this topic in more detail in his presentation. bis central bankers ’ speeches since the last monetary policy assessment, the swiss franc has moved closer to the minimum exchange rate, and has thus strengthened against the euro once again. at the same time, both it and the euro have depreciated against the us dollar. overall, the exportweighted real external value of the swiss franc is virtually unchanged compared to last year, and thus continues to lie considerably above its long - term average. the swiss