First, it is very likely that an exchange rate of 53 on a trade-weighted basis was as unsustainable as an exchange rate of 69.3. Neither represents an ‘equilibrium’ level of the exchange rate, so to measure exchange rate appreciation from that artificially low level risks creating quite a false impression.
Financial integration has facilitated the consolidation of financial structures, thereby increasing crossborder corporate linkages. In recent years, large flows of foreign direct investment among euro area countries have exemplified this intensification of corporate linkages. The second key success of the euro relates to the convergence of long-term market interest rates towards those of the best performers in terms of credibility and low interest rates.