Indeed: - Franco-German monetary cooperation is based on solid foundations and has steadily developed during the last fifty years (1) - this cooperation will be crowned by the creation of monetary union in 1999 (2). FRANCO-GERMAN MONETARY COOPERATION IS BASED ON SOLID FOUNDATIONS AND HAS STEADILY DEVELOPED DURING THE LAST FIFTY YEARS In order not to bother you by an unduly long speech, I will focus on the last fifty years only! Nevertheless, one could easily demonstrate that our respective monetary histories have been deeply linked since the Middle Ages. Indeed, Emperor Charlemagne enacted a bill creating a unit of account common to its whole empire, which enshrined most of the present territories of France and Germany. The global features of the system (in particular the subdivisions) experienced an exceptional longevity of almost 1000 years. The last fifty years constitute, however, a rather homogeneous period, during which Franco-German monetary cooperation really developed. First, it is useful to underline the solid roots and foundations of this cooperation. These foundations paved the way for the emergence of a common destiny, which is best illustrated by the creation of the EMS. This community of views and interests have been crucial in the decision to create a European monetary union and a single currency. I will first explain the solid roots and foundations on which Franco-German monetary cooperation is based Franco-German monetary cooperation is based on historical and economic foundations. The historical roots of Franco-German monetary cooperation can easily be identified.
Now that the interest rate has moved up to a fairly normal level, the rise in house prices has come to a halt, and prices are now falling. We have seen that when the interest rate is raised to curb the rise in prices for goods and services, interest-rate setting also contributes to stabilising asset prices. Moreover, we believe that our communication, where we emphasise that the interest rate is set with view to stabilising inflation, and with forecasts for the interest rate ahead, has contributed to dampening fluctuations. It is nevertheless important to be aware that in a small open economy like Norway there is little room for setting the interest rate at a level that diverges from that of other countries with the aim of influencing property prices and credit growth. The task of steering inflation is in itself demanding. With Norway’s balance-of-payments position, the effects on capital movements and the krone exchange rate may be considerable. Pursuing a very firm approach to steering property prices and credit will easily lead to a krone out of balance and result in adverse effects on inflation and inflation expectations. Monetary policy contributes to stabilising developments in the economy. Nonetheless, in some areas, the framework may lead to a situation where business cycles may be selfamplifying. In the following, I will focus on aspects of the functioning and regulation of the housing market and banking activities. The interplay between developments in the housing market and the credit market is important for stability in our economy.