Despite the fact that anyone travelling between the euro countries and wishing to use banknotes and coins has had to exchange them, the national currencies have merely served as different expressions of the same thing, namely the euro, after 1 January 1999. Since that date there have been major changes in the economies of the euro countries, not least in the foreign exchange markets and the markets for securities, which, among other things, I will discuss today. In the following I shall begin by discussing the development trends we have seen on the markets for securities over the past few years and then take up various impediments to continued integration in the securities field. After this I intend to speak about the significance of the single market and the single currency for Sweden. Capital adequacy rules steer the euro money market Let us begin by examining the money market, where short-term securities are traded, normally loans to be repaid within a year. The interbank market for unsecured transactions became almost fully integrated right from the start of the monetary union in 1999. The joint monetary policy and harmonisation of market practices were the main reasons for this rapid process. However, the relatively immediate success of the joint reference interest rate EONIA and the well-functioning settlement of cross-border payments via TARGET also played a large role. Since then we have seen a particularly strong increase in activity among various derivatives.
Forth, for emerging markets, the most threatening externally-induced crises going forward will be those that relate to the concentration of global liquidity, either too much or too little, in the form of large, persistent, and volatile capital flows that overwhelm the capacities of individual countries to manage and adjust to. And the most worrying aspect of this is that the trigger would lie outside the controls of emerging market’s policymakers since the flows would be the results of market conditions and policy prescription elsewhere. Let me now turn to my second observation on the implications that the changing nature of future crises can have for the conduct of EWE going forward. On this, I have four points to make. First, in view of the changing nature of future crises, it is therefore important that the thrust of the EWE is mindful of this possibility. In my view, the focus of EWE should expand beyond macro-misalignments based on historical relationships to include assessing the robustness and the resiliency of the systemically-important markets, system, and institutions. This means the key objective of EWE will not be to forecast future crises per se, but to identify vulnerabilities in the most important areas in advance, especially those risks that are not covered by market data or by the surveillance process elsewhere. Second, for EWE to be effective and comprehensive, it should be done at two levels to cover both the global dimension and the country-specific dimension of risk.