The period prior to the start of Stage Three of EMU was characterised by the unprecedented convergence of short and long-term interest rates, the convergence of inflation rates, the reduction in the general government budget deficits and debt ratios as well as relatively stable exchange rates between the countries joining EMU.
Given the convergence of long-term interest rates towards a relatively low level, market participants gave the ECB a vote of confidence at the start of Stage Three of EMU. Moreover, inflationary expectations have remained low since the beginning of Stage Three of EMU. I shall elaborate on this issue later on in my speech.