With regard to the Eurosystem’s relationship with European Community institutions, the Treaty states that the President of the ECOFIN Council and a member of the European Commission may participate in the meetings of the Governing Council of the ECB, with the right to express their views but without voting power. The President of the ECB attends hearings at the European Parliament at least four times a year to discuss the activities of the Eurosystem and is also invited to attend the informal euro-11 Council meetings. I should like 5  BIS Review 60/1999  to stress that the participation of the President in these meetings serves the purpose of exchanging information and views, while fully respecting the independence of the Eurosystem. In the field of the international representation of the ECB, formal and informal agreements have been reached with the IMF and the OECD and in the context of the G7 and the G10. At the end of last year the IMF granted the ECB observer status, full membership being restricted to individual nations. Nevertheless, this observer status will allow the ECB to participate in the relevant work and assessments by the IMF of economic policies in the euro area and beyond. The international role of the euro Clearly, the introduction of the euro has had important implications for international capital markets.
Clearly, the disappearance of 11 national currencies and the introduction of the euro as a major international currency had an immediate impact on the turnover and focus of attention in the global foreign exchange markets. This has been reflected, for example, in rather active and liquid euro/dollar trading in the foreign exchange market since the launch of the new currency. However, there are also indications that the euro has further potential to grow in other markets as the surprisingly slow development of euro/yen trading suggests. The euro can also be expected to become an attractive currency for the investment of official reserves. One of the key elements to further international portfolio diversification in favour of the euro is the creation of a large, liquid and integrated capital market in Europe that began with the launch of the euro. For short-term instruments, we are now dealing with a broad and liquid European money market that ensures very similar short-term interest rates for comparable instruments and credit risks. The development of this market has been strengthened by the Eurosystem’s operational framework of open market operations, which is mainly based on reverse transactions, and the implementation of the new TARGET real-time gross settlement system in participating countries. At the longer end of the maturity spectrum, market integration was jumpstarted by the redenomination of outstanding government debt in euro and by the convergence of interest rates to narrower spreads following the elimination of the exchange rate risk.