I think there is a broad agreement on the fact that interest rate decisions are state-dependent rather than time-dependent and as a consequence, both the frequency and the amplitude of the policy changes are mainly driven by the underlying state of the economy. As far as the Eurosystem is concerned, the more gradualist approach is nothing but the reflection that the economy of the euro area has been less affected by cyclical fluctuations than the US economy. Moreover, recent research carried out by the Eurosystem on inflation persistence tends to show that the degree of inflation persistence in the euro area is quite moderate while the degree of price stickiness is considerable and higher than in the United States. This finding may provide another justification for a gradualist monetary response to cost-push shocks as: first, the impact of an inflation shock will be small as agents anticipate a low persistence of this shock and therefore will maintain their expectations of future inflation at low levels; in turn, the negative response of the output gap will be limited implying a less persistent response of the real rate. 5. As a result, the Eurosystem monetary policy has won European citizens’ confidence in and acceptance of the new currency  Finally, the euro has been readily accepted by economic agents and is now part of European consumers’ daily lives. Surveys confirm that the general public has confidence in the euro, as a solid currency, and in the Eurosystem as their Central Bank.
Thus, for instance, fiscal policy coordination mechanisms have been the focus of particular attention, with monitoring and surveillance procedures to avoid excessive budget deficits (of over 3% of GDP) and high public debt proportions (over 60% of GDP) coming into play. Indeed, these thresholds, along with the procedures for their prevention and ultimate correction, took the form in 1997 of an agreement known as the Stability and Growth Pact. In contrast, the rules for coordinating “structural” policy (e.g. those governing the workings of the labour market or the markets for goods and services) were fairly lightweight as a result of their broader scope for application and of the difficulties involved in setting common objectives. Also, in the area of financial regulation and supervision policies, countries continued to enjoy a high degree of independence. The limitations of the monetary union’s adjustment mechanisms As events have shown, the constraints imposed by the institutional framework were not powerful enough to ensure the appropriate response by national authorities in the face of potential slippage from the stability levels required. It was hoped that the very fact of monetary union membership would activate sufficient response mechanisms.