However, at the Bank of Greece we knew that this was not sufficient to ensure a smooth run up before entering first the ERM I and subsequently the Euroarea. Speculators are always waiting round the corner and, sometimes, markets may wish to test the country’s resolve to maintain its exchange rate targets.
Therefore, we followed throughout the six years before entering the Euroarea a high interest rate policy so as first to keep foreign investors happy and keep their confidence but also in order to build a high level of foreign exchange reserves so as to be able to have sufficient reserves to thwart speculative attacks.