In this regard, the ECB supports both private-sector and European Commission initiatives to encourage further integration, such as the follow-up to the report of the Commission’s Forum Group on Mortgage Credit. Infrastructure Integration of financial markets cannot take place without an integrated payment, clearing and settlement infrastructure. This brings me to the third component of the financial system, the financial infrastructure, which also gives me the opportunity to illustrate some cases of where the ECB has taken direct action. TARGET is one such example. Had TARGET not been operational from the first day of Monetary Union, there would have been no means of transferring liquidity from a country with a liquidity surplus to a country with a liquidity deficit. Consequently, we would not have had a single but several money markets, which would have made monetary policy far more difficult to implement. Over time, TARGET has continuously increased its market share in large value payments in euro. TARGET's market share is now around 90% of the total traffic value compared to 70% at the moment when the euro was launched. At the same time, the domestic component has remained at roughly three quarters of the total traffic value. However, our ambitions did not stop in 1999. We are currently building TARGET2, which is due to go live in 2007 and will replace the current decentralised system with a single technical platform.
Second, a well integrated financial system helps to make the euro area economy more efficient through the reduction of financing costs and an improved allocation of financial resources. This is likely to be conducive to higher and more sustainable non-inflationary growth. A study sponsored by the European Commission concluded in 2002 that further integration in the European Union might generate additional gains of 1% in the overall level of real GDP over a decade or so. Third, European financial integration is a priority that has been reiterated by the European Council on several occasions. The ECB’s support for European financial integration is therefore in accordance with Article 105 of the Treaty, which states that “the ESCB [– European System of Central Banks –] shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community”. Finally, there is the interconnection between financial integration and financial stability. As deeper financial integration may, to some extent, change the interplay of vulnerabilities, the potential impact of these on financial stability – which is of natural interest to central banks – has to be taken into account. The ECB uses all available channels in its efforts to foster European financial integration. We try to raise awareness of the need for integration and the means of achieving it. We also advise on the shaping of the legal framework. Furthermore, the ECB can act as a catalyst for collective initiatives from the private sector.