However, this seems to reinforce their conviction that regional cooperation is necessary to achieve stable and non-inflationary growth and to overcome latent economic conflicts with their trading partners. As in the case of the regional process of integration in Europe, it may well be that the final objective of the Mercosur regional agreement goes beyond that of trade cooperation. The international community should support regional cooperation efforts among countries that have strong trade relationships and are willing to achieve progress in economic convergence. These efforts have significant positive externalities and could contribute to greater effectiveness of multilateral and bilateral surveillance. The exchange rate of the euro To complete the picture of the international role of the euro, let me finally refer to the exchange rate of the euro vis-à-vis other major currencies, namely the US dollar and the Japanese yen. I should like to take the opportunity to reaffirm that the ECB does not pursue any exchange rate target in its stability-oriented monetary policy strategy. Our objective is to maintain stable prices in the euro area and not a specific level of the euro’s exchange rate. According to our strategy, the exchange rate of the euro is the outcome of current and expected economic policies pursued in the euro area, and economic developments in both the euro area and abroad. Conclusions To summarise, the new institutional monetary setting in Europe has consequential implications for international capital markets and international policy cooperation.
Finally, if you look at the structure of financial markets on both sides of the Atlantic, you may note the difference between the “bank-based” system of finance on the European continent and the “market-based” system in the United States. Although there seems to be a trend away from banks towards non-bank financing in the euro area, reinforced by the introduction of the euro, banks still play a dominant role in providing financial services in the euro area. Domestic credit as a share of domestic output accounts for 130% in the euro area, compared with 80% in the United States. Correspondingly, stock and debt markets are much smaller in the euro area than in the United States. While the shares of euro area debt securities and stock market capitalisation relative to GDP remain clearly below 100% (91% and 63% respectively), the figures for the United States are in both cases well above 150% (155% and 172% respectively). This brings me to the use of the euro as an international currency in the global financial system. The role of the euro as an international currency Given the weight of the euro area in the world economy and the legacy of the former national currencies, which have been replaced by the euro, it is no surprise that the euro is the second most widely used currency behind the US dollar. A number of observers have argued that one of the main motivations behind Economic and Monetary Union (EMU) was the development of the euro as a major international currency.