But, as a citizen, I cannot help and feel proud of having one the two main currencies in the world. In sum, benefits of the euro include a high degree of credibility of monetary policy reflected in the level of long-term interest rates; diminished exchange rate volatility; completion of the single market and encouragement to cross-border trade. None of this, of course, can be taken for granted. Benign conditions currently prevailing on financial markets can be reversed. External or internal shocks may be coming, which would impact negatively European economies. The American economy could for example slow down more sharply than anticipated. Fuelled by an excessive expansion of credit, some internal imbalances, although in no way comparable to those in some other developed economies, could also develop in the euro area, especially in the housing sector. But I have the strong conviction that we are fully equipped to deal with any contingency, and, provided the necessary structural reforms are undertaken, keep the economy on a path of growth and stability. BIS Review 3/2007  1  2)  How have those successes been achieved? A lot comes, in my view, from the institutional and operational framework in which monetary policy is developed and implemented. The independence of the ECB and of the 12, very soon 13, participating NCBs is enshrined in the Treaty. They are institutionally, operationally and financially independent from European Community institutions and national governments. We have a clear and transparent definition of price stability: inflation below but close to 2% over the medium-term.
In 2005, EU Heads of Government re-launched the Lisbon strategy with an enhanced focus on jobs and growth and a streamlined governance regime. The key elements are the National Reform Programs which cover, for each country, the commitments taken over a 3-years cycle as regards structural reforms. EMU, with a single monetary policy and 12 governments responsible for budgetary policies, requires an institutional fiscal framework. It has to be simple, easy to implement, and able to ensure that fiscal policies are sound and sustainable, to avoid free-riding behaviours as well as neo-ricardian effects. The most widely-discussed surveillance process, because it is the most binding one, is the Stability and Growth Pact (SGP). The Pact may be defined as the “users instructions” for the obligation, defined in the Treaty, for EU Member States, to achieve a medium-term budgetary position of close to balance or in surplus, while maintaining the ratio of the annual government deficit to gross domestic product (GDP) at within 3 % and the ratio of gross government debt to GDP at within 60 %. Member States which do not respect these ratios face an “excessive deficit” procedure which may lead the Ecofin Council to take a series of measures which range from simple recommendations to financial sanctions. In 2005, the European Council agreed to reform the SGP. The important role of the SGP in terms of budgetary discipline is confirmed.