indicator of the progress already made in the integration of euro area stock markets. the euro area capital market is larger and more open than any of the domestic markets and provides investors with more varied opportunities for investment, but it is not yet fully integrated. there are still some barriers : for example different traditions and local market practices, national regulations and tax regimes. one major obstacle to the efficient functioning of financial markets is also the prevailing segmentation of financial markets in europe. so, while the introduction of the single currency was a major step towards integration, the high degree of segmentation in europe ’ s securities markets remains one of the primary reasons for structural weaknesses. allow me to illustrate this by providing an example : there are currently more than 20 different securities settlement systems in the euro area operating on different trading and clearing platforms. in other words, the euro area lacks a sufficiently integrated system for the clearing and settlement of securities and for managing collateral at the cross - border level. but market pressure is growing and the securities settlement systems are faced with increasing demands for consolidation. … the euro, in tandem with technological progress and continuing globalization, has put more pressure on european exchanges to strive for structural improvements. we should also be aware that the process of consolidation of stock exchanges is taking place within the context of the integration of capital markets in the euro area. this allows exchanges to benefit from increased economies of scope and scale they may obtain by using new information and telecommunication technologies. since the introduction of the euro several initiatives have been launched by stock exchanges with a view to forming alliances or merging activities. the recent flurry of excitement about the future of the london stock exchange gives an indication of just how important the push to consolidate europe ’ s stock exchanges has become. the increase in m & a activity is a sign of the competition between business and financial locations due to changing market conditions and the increasing competitive pressures to which the different financial intermediaries are exposed. further efforts must be undertaken to remove the remaining segmentation and harmonize market architectures, accounting rules and tax treatment. several initiatives are already under way and progress is being made on the harmonization of market practices ; here, eg the “ financial market action plan ” of the european commission comes to mind, and national governments and european market organizations have been working towards these goals. an important recent initiative was the decision of the ecofin - council to establish a committee of wise men in order to identify the obstacles which stand in the way of a single market in securities and consider

of eurocurrency reserves held worldwide amounts to some 13 %. moreover, approximately 50 states already use the euro as their nominal anchor currency. but also trade transactions will over time increasingly be switched over into euro, thus sheltering european businesses from international currency fluctuations. ladies and gentlemen, for economic policy makers, the euro provides a strong incentive to reinforce economic reform. let me just quote two examples : fiscal policy and structural reform. as you know, before entering the euro area, a country has to satisfy strict economic convergence criteria. the latter include the observance of limits on the government deficit and debt. governments strengthened this unique arrangement already ahead of the start of the euro by agreeing on the so - called stability and growth pact. this pact stipulates, among other things, that governments commit themselves to achieving balanced budgets or fiscal surpluses over the medium run. in practice, the stability pact has so far been taken very seriously, and the majority of eu countries already exhibits budget surpluses. also austria has commited itself in its so - called stability program to achieve a balanced budget by next year. let me emphasize : the firm adherence to stability and growth pact is key to europe ’ s and austria ’ s long - term attractiveness as a business location, and therefore for growth and employment. the second example of a policy area, where the euro exerts strong reform pressure, is structural reform. with a single currency across the euro area, divergent economic developments among the euro area countries need to be absorbed by adjustments in goods and labor markets. the more flexible and the faster these markets react to economic disturbances, the better for growth and employment. economic reforms which aim for such flexibility are thus high on the agenda. european politicians have therefore taken a number of important initiatives in the past three years to foster structural change and adaptability of the european economy. the so - called " luxembourg process " calls for employment guidelines to be issued on an annual basis, which recommend actions to raise the flexibility and the skill level of the work force. the " cardiff process " aims at structural reforms in the product and capital markets by establishing best practice models and benchmarking. finally, in lisbon 2000 the european union set itself the goal to become the most competitive and dynamic knowledge - based economy in the world, inter alia by further liberalisation of network industries and an extension of benchmarking in new policy areas. ladies and gentlemen, to be sure, living with the euro is not just plain