willem f duisenberg : the international role of the euro speech by dr willem f duisenberg, president of the european central bank, on the occasion of the 2000 spruce meadows round table, held in calgary, on 8 september 2000. * * * let me first thank the organisers of this conference for having invited me to share some thoughts with you on the international role of the euro. the euro was successfully launched 20 months ago as the single currency of 11 member states of the european union ( eu ) - known as the “ euro area ”. on 1 january 1999 these member states transferred their monetary sovereignty to a new supranational institution, the european central bank ( ecb ). since then, the eurosystem - composed of the ecb and the national central banks ( ncbs ) of the 11 countries that have adopted the euro - has been in charge of the euro area single monetary policy and related functions, such as foreign reserve management and operations and payment systems oversight. the euro has brought about fundamental changes to the economic and financial environment in the euro area and beyond. by lowering transaction costs and enhancing price transparency, the single currency represents a major contribution to fostering competition and efficiency in goods and financial markets across the euro area. as such, the introduction of the euro represents a quantum leap towards completing a fully integrated single market in the eu and lays a solid basis for the improvement in the living standards of european citizens. besides these welfare - enhancing effects on the “ domestic ” economy of the euro area, the new setting also has far - reaching consequences for the world economy and the international community. let me shed some light on the international ramifications of monetary union by highlighting three interrelated aspects. first, the use of the euro as an international currency in the global financial system ; second, the growing role played by the eurosystem in international policy cooperation ; and, third, relevant aspects of the exchange rate of the euro. before dealing with these points in turn, i should like to recall some key economic features of the euro area. key economic features of the euro area let me begin by putting the euro area into an international perspective. the euro area represents a large and relatively closed economy. given its population of almost 300 million people and its significant weight in the global economy, the euro area is broadly comparable with the united states. as regards its size and structure, the most striking fact is that the euro area economy has a share of world output of around

three main implications for its participation in international policy cooperation. first, a reciprocal exchange of information and views is a substantial component of the eurosystem ’ s cooperation with the international organisations and fora. regular consultation on external economic developments enhances the ability of the ecb to analyse the outlook for price developments in the euro area, which in turn provides useful input into the effective implementation of its monetary policy. by taking into account possible spillover effects from third countries ’ policy actions, consultation contributes to reducing the likelihood of misinterpreting the impact of foreign developments on domestic variables. given its voluntary nature, consultation does not compel the ecb to adopt a monetary policy inconsistent with its objective of price stability. second, a reciprocal exchange of information and views is supplemented by international surveillance. in this case, a third and independent party, such as the imf or oecd, regularly monitors and assesses the economic policies of its members. the ecb participates in the surveillance process for policies falling within its competence ( e. g. monetary policy, payment systems oversight ). this means that, whenever monetary policy is under surveillance, the ecb is solely responsible for its interaction with the imf and oecd. standards and codes recently adopted by the imf and other relevant international institutions are a way of defining best policy practices and enhancing transparency in the field of monetary and financial policy. in this respect, the ecb ’ s involvement in regular surveillance further strengthens its accountability through being transparent. third, in the area of macroeconomic policies, consultation and surveillance are the only forms of international cooperation that are relevant to the eurosystem. any form of ex ante policy coordination of monetary with other macroeconomic policies would neither be advisable for the eurosystem nor be compatible with the ecb ’ s mandate and independence. apart from the well - known recognition and decision lags in policy - making, attempts to coordinate ex ante would not only blur the specific responsibilities of individual policy - makers, but also reduce their accountability. in determining its monetary policy stance, the ecb should and does take into account all relevant information. it cannot let its policy solely be determined by the current and future course of other policies. this could easily compromise the maintenance of price stability. the ecb ’ s active participation in the ongoing process aimed at strengthening the international financial architecture is to be seen against this background. the eurosystem supports such a process for two reasons : first,