In such a context there is a risk that the banks could act even more procyclically than they usually do and would amplify the cycle. To be clear, the uncertainties and the economic slowdown have so far not caused banks to tighten their lending conditions or to grant less credit. But we need to keep a very close eye on how this evolves. How will the banks behave if the economic slowdown continues? Would you say that financing conditions in the euro area as a whole have already tightened significantly? Financing conditions have tightened somewhat in recent months, but not significantly, thanks in part to our forward guidance on interest rates. This partly compensates for such effects. But you’re absolutely right, we as central bankers must always ask ourselves whether our monetary policy stance is appropriate for us to attain our objective. And what is your answer at the moment? We have revised our assessment of risks to growth downward. I would say that is a clear indication that the level of alert is higher than before. 2/5  BIS central bankers' speeches  Three quarters of below-potential growth, higher risks and at least slightly tighter financing conditions – what does that signify for the inflation outlook? Is the ECB’s Governing Council losing its confidence in reaching the target of 2% over the medium term? Three quarters of below-potential growth are certainly not good news. But we have a medium term perpective.
In view of the discussion that this matter occasions from time to time, there may be reason to say something about the view of the Riksbank. 1. A new currency is created A new currency will see the light of day in January 1999. Eleven countries in Europe are forming a monetary union and will accordingly be having a currency, a monetary and exchange rate policy, and a central bank in common. The euro will be the domestic currency of a major economic area. Today, the euro area’s share of world output is around 30 per cent, as against around 35 per cent for the United States. As regards world trade, the share for EMU’s external trade amounts to around 17 per cent and the United States around 15 per cent. EMU is a central component in the process of European integration. This process was initiated in the 1950s with agreements on the joint control of certain means of production, the European Coal and Steel Community. The idea was to forge economic bonds between nations as a way of promoting peace in Europe. The establishment of the Common Market in the 1980s was a further step, aiming at freedom of movement within the Community for goods, services, capital and individuals. With the introduction of a single currency, the countries of Europe will come still closer to each other in economic and political terms. At the same time, yet another obstacle to the creation of a large internal market in Europe will be removed.