1 january. it is because europeans have seized the opportunity to play an active part in the euro changeover that we can already pronounce this unprecedented move a tremendous success. with the introduction of the euro banknotes and coins, the euro has ceased to be a currency familiar only to the financial markets, to financial institutions and large enterprises. on 1 january at 00. 00 hour, the introduction of the euro banknotes and coins marked not only the completion of economic and monetary union, which is a crucial achievement in itself, but one of the major, if not the major step forward in the history of european integration. i am convinced that 1 january 2002 will appear in the history books in all our countries and beyond as the start of a new era for europe.

premia. these rates, in turn, affect the costs of funding for households, for firms, and for governments. the resulting financing conditions affect economic activity and, in the end, prices. the functioning of the market for government bonds is central to the transmission of the ecb ’ s policy rates. this is because of several channels. via the price channel, interest rates on government bonds influence financing conditions within the economy. for example, they are often used as a reference rate when a bank prices a loan for a customer, or when a company borrows money by issuing a bond. sovereign financing conditions, under normally functioning bond markets, often provide a floor for the funding conditions of the private sector. interest rates on government bonds always include add - ons to compensate for liquidity risk and credit risk. but these risk premia should not become so large that they dominate the signal from the key policy rates to a point where it is no longer distinguishable and does not reach the real economy. this can happen when markets no longer function properly. closely related is the liquidity channel, which comes into play at the start of the transmission mechanism, influencing short - term interest rates beyond the conditions set by policy rates. government bonds are often used as collateral for banks ’ refinancing operations. in fact, government bonds are the primary collateral used in the secured interbank market. if government bond markets are disrupted, this hampers the functioning of the interbank market and reduces liquidity in this market. the consequences are increased money market rates due to premia for liquidity risk. as a result, the capacity of banks to issue loans and refinance the real economy suffers. a third channel, the balance sheet channel, is indirect : lower government bond prices, which correspond to higher bond yields, imply valuation losses in the assets held by the financial and non - financial sectors. for banks, the lower capital base may mean that they can supply fewer loans to the economy. for borrowers, their creditworthiness is reduced, and this affects their capacity to borrow. because of these channels, severe tensions in the bond market hamper the monetary policy transmission mechanism. the relation between our key interest rates and the rates applicable in the real economy gets out of order, and our main tool for influencing refinancing conditions in the real economy does not work the way it should. this is the situation that threatened us at the beginning of this month, so we saw the need to act quickly