secondary markets for government bonds. we also took the decision in complete independence. we were aware of the commitments made by euro area governments prior to that weekend, on the evening of friday 7 may. in particular, the governing council took note of the statement by euro area governments that they “ will take all measures needed to meet [ their ] fiscal targets this year and the years ahead in line with excessive deficit procedures ” and of the “ precise additional commitments taken by some euro area governments to accelerate fiscal consolidation and ensure the sustainability of their public finances ”. ( quotes from statement by euro area heads of state or government, brussels, 7 may 2010 ) this brings me to the third issue i would like to discuss. iii. economic governance at a crossroads you have asked me to speak about enhanced economic coordination and surveillance in the euro area. the ecb believes that a true quantum leap is needed in the framework for surveillance and adjustment of fiscal policies, as well as broader macroeconomic policies concerned with europe ’ s competitiveness. “ la solidarite de fait ” that robert schuman called for 60 years ago is reflected in the degree of economic integration and interdependence already achieved in monetary union. but solidarity is a two - way street. the benefits and protection that are derived from membership of monetary union bring with them responsibilities and obligations. this is the fundamental contract which forms the basis for our currency. we now have to turn it into a more effective structure for fiscal and macroeconomic surveillance and adjustment. in line with the topics addressed by the task force chaired by european council president van rompuy, let me focus here on two main areas of reform. a third area, a crisis management framework, is still to be examined at the level of the task force. first, it is of the essence that the surveillance of budgetary policies be strengthened. i am pleased to note that the european council confirmed this assessment at its meeting last thursday. at the level of the eu27, and in particular within the euro area, we must have effective instruments to prevent – and, where necessary, correct – excessive deficits and debt levels. a more stringent implementation of rules and procedures is essential, among other things by increasing the automaticity and speed of procedural steps. the initiation of sanctions also needs to be quasi - automatic. fiscal surveillance must be more direct and effective. it must also be based on more independent monitoring and assessment. we may need a differentiated approach to surveillance depending on the fiscal performance

domestic participants to manage exchange rate movements and reflected the desire to accommodate greater flexibility in the exchange rate in the future. the pboc has entered into a series of bilateral currency swap agreements whereby the pboc and other central banks ( over 20 in number ) have agreed to exchange the rmb with the respective counterparty currencies. 15. the size of the indian economy of around us $ 1. 8 trillion is one of the largest in the region and despite some moderation in the growth in the past couple of years, it is still one of the fastest growing countries in the world. the value of the indian rupee is marketdetermined without being pegged to any currency. india ’ s foreign exchange reserves are amongst the largest in the region. all these factors make the indian rupee a natural candidate for being considered for greater internationalization, especially greater use of rupee for trade invoicing. comparisons are bound to be made between renminbi and indian rupee on the issue of internationalisation. 16. indian rupee is not fully convertible at this stage. while the current account has been made fully convertible, we have consciously followed a calibrated approach towards capital account convertibility. despite showing increasing trends during last few years, india still accounts for a very small proportion of the global foreign exchange market turnover. though rupee invoicing is permitted under extant fema regulations, almost the entire bulk of international trade in india continues to be denominated in the us dollars ( the share of dollar bis central bankers ’ speeches invoicing in exports and imports during quarter ended december 2012 stood at 90 per cent and 83. 6 per cent, respectively ). we also need to recognise other structural bottlenecks that come in the way of transforming mumbai as an international financial centre similar to hong kong. 17. it is also important to understand that unlike china, which runs large current account surpluses, india has generally been a current account deficit country. in view of the large current account deficit, the exchange rate of the rupee is susceptible to the debilitating influence of large capital movements, especially during crisis periods. our accumulated reserves are in a sense “ borrowed ” reserves and not “ earned ” reserves in true sense. the sense of self insurance by having enough reserves can often prove to be misplaced, especially, during times of sudden reversal of capital flows. this does not mean that we should not aspire to see the rupee as an international currency.