The firm, concerted response by the monetary authorities in the main economic areas softened the initial impact on financial markets and meant that the effects on the world economy were relatively short-lived, though sharp, and confined to specific sectors. Broadly, the design of the euro area members' fiscal policies in 2001 prevented expansionary discretionary measures being adopted. Such measures would have jeopardised the sustainability of recent fiscal consolidation achievements and, given the lag with which such measures operate, they could have had a counter-productive effect on the cyclical stability of the economies in the area. However, the available estimates of the structural budget balance show that, at the aggregate level, there was a slight deterioration last year as a result of the tax cuts applied in certain countries before the cyclical weakening had become apparent. Further, fiscal results have shown that, in certain countries, not enough room for manoeuvre was available to absorb the budgetary effects of the slowdown without drawing too close to the limits set in the Stability and Growth Pact. Clearly, in such cases the consolidation drive made has not been sufficient to attain a balanced budgetary position. In this respect, it is of paramount importance that EMU members maintain the commitments entered into under the Pact and do so symmetrically, as reflected in the conclusions of the Barcelona Summit. The appropriate response by economic policies to the slowdown in 2001 has therefore contributed to the recovery of the European economy apparently under way since the beginning of the current year.
Jaime Caruana: Presentation of the Bank of Spain’s annual report Speech by Mr Jaime Caruana, Governor of the Bank of Spain, to the Governing Council of the Bank of Spain on the presentation of the annual report, Madrid, 14 June 2002. *  *  *  A year ago I addressed you in my first presentation of an Annual Report, that for the year 2000. At the time I highlighted the importance of an impending event: the introduction of euro notes and coins. This event clearly symbolised the culmination of monetary union in Europe, a process set in train ten years earlier and coming to fruition against a background of enormous expectation not free from uncertainty. It is only fair today to start by stressing the success of the cash changeover, which was notably smooth despite the complexity inherent in such a singular, large-scale and radically novel operation. Underpinning this success was the collaboration of all the sectors concerned: households and firms and, in particular, the banking system and the distribution sector, without whose contribution the changeover of notes and coins would have simply been unviable. The fact that such a far-reaching change should have found such widespread support in society ultimately reflects European citizens' acceptance of their new currency and their confidence as to the benefits they may reap from it. With the culmination of this process, the euro area is consolidated as an extensive and stable monetary zone.