than some financial market players had expected. at any rate, the media expressed surprise that no major mishaps were to be reported. a steep rise in equity and foreign - exchange - market prices seemed to bear that out. some people actually believed that the longer - term potential of the euro could be exploited in full in the first few days. a few apparently thought that • global investors would quickly switch a large proportion of their assets into euros, and that • central banks would rapidly diversify their reserves in favour of the euro. in the meantime, a rather more cautious assessment - at least, as compared with the initial euphoria - has won through in the markets, especially as regards the pace of any such assumption by the euro of the role of a major investment and reserve currency. exaggerated short - term expectations have thus inevitably been followed by a certain disillusionment, and even disappointment, which has ultimately been reflected in the external value. political developments in the balkans have likewise played ( and are still playing ) a role, at least in the short run. however, there is no reason at all to write off the enormous potential of the euro - which some people have seemingly been tending to do of late. the potential is there. yet the markets should not be too short - term in their orientation. the international attractiveness of the euro will hinge crucially on the extent to which it manages to gain investors ’ long - term confidence, and to which it succeeds in accumulating credibility of its own. of course, that will owe a great deal to the economic and political setting. that has likewise been the case in the past six months : • in the economic setting, it has transpired that - contrary to some fears expressed during the past year - the us economy continues to be marked by an exceptionally buoyant growth process. in a number of euro countries, by contrast, the impression of a certain short - lived slackening in growth has been confirmed. in the meantime, however, there are signs of activity starting to pick up again soon. and as far as the political setting is concerned, a number of euro countries are still rather far away from the medium - term objective of the stability and growth pact, namely a balanced budget, as is mentioned in the recent monthly bulletin of the european central bank. that forms a distinct contrast to the united states, which is in the enviable position of being able to think about what it can do with its budget surpluses

do not know very precisely just what the monetary indicators are telling us. above all, it is not yet manifest just how far the financial markets and consumers have changed their habits as a result of the introduction of the euro. altogether, therefore, monetary policy in the euro area is in a position in which it can rely less than it used to in the federal republic of germany on the old relationships, laws and experience familiar from national monetary policy. that, of course, confronts it with new, serious challenges. incidentally, the governing council foresaw that development and formulated its monetary policy strategy accordingly. in the light of past experience - not least that of the bundesbank - it assigned a special place in its analysis to the money stock. at the same time, however, it is also trying to estimate inflation prospects and inflation risks direct, on the basis of an analysis of a broad range of the factors determining prices. needless to say, these factors include ( besides foreseeable movements in costs ) real economic trends. they likewise include the exchange rate. we cannot, and must not, ignore either the one or the other. but we are not thereby pursuing the objective of activist demand management. nor are we pursuing an exchange rate target. instead, we are analysing these factors very carefully, along with the money stock, and evaluating them in the light of their implications for the objective - that is the logical consequence of the strategy we have chosen. of course, i know that this seems too “ discretionary ” to some people ; it smacks too much of “ muddling through ” to them, and seems to require too much confidence in persons and too little in rules. and i know that some people would best like a strategy that could easily be expressed in terms of mathematical formulae, so that monetary policy could be forecast by computer or actually computerised. perhaps those mathematically oriented watchers will be glad to hear that there are some people in the governing council who are pretty good at maths - for instance you, wim. at all events - as i have recently read in the magazine “ focus ” - the dutch ministry of education has recently been advertising for young teachers, using a nice picture of you, wim, in your youth. the caption below the photo reads : “ wie heeft wim duisenberg leren rekenen? - mooi werk, juf. ” and for all those who are not so conversant