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These days we are celebrating the 10th anniversary of the historical decisions made by the EU in May 1998, which led to the introduction of the euro as the single currency of 11 EU member states as of 1 January 1999 and the establishment of the European Central Bank, ECB, on 1 June 1998. The task of the ECB was initially to prepare, and later to implement, the single monetary policy in the euro area.
At birthday parties, it is customary to draw attention to the achievements.
Initially, I would like to congratulate the ECB with its success in anchoring inflation expectations and promoting price stability. Since the introduction of the euro, annual inflation in the euro area has averaged just over 2 per cent, compared with 3 per cent in the 1990s and 8-9 per cent in the preceding decades.
The introduction of the single currency has boosted cross-border trade and investments within the euro area. The euro has also been a key catalyst for the growing integration of the financial markets and cross-border consolidation within the financial sector. Maintenance of price stability makes the euro a strong currency, and it has become the world's second most important reserve currency, surpassed only by the US dollar.
It is also remarkable that the euro area has shown stability and resilience over the last year or so – amidst turmoil in the financial markets, soaring commodity prices and a considerable slowdown in the US economy. Previously, such external shocks to the European economies often went hand in hand with currency unrest.
The contrast to the 1970s in particular is striking. At that time, any hopes of increased economic policy coordination and binding cooperation were dashed by national short-term economic policy to address sudden challenges. Besides currency unrest, this period was marked by recession, high inflation, rising unemployment and large budget and current-account imbalances. The lessons learned in these years were essential when the plans for stronger economic and monetary cooperation were drawn up in the following years.
The main objective of euro area monetary policy is to maintain price stability, i.e. inflation close to, but below 2 per cent in the medium term. By keeping the krone stable vis-à-vis the euro during the many years in which Denmark has conducted a fixed-exchange-rate policy, a framework has also been created for low inflation in Denmark. The euro is by far the most important foreign currency for the Danes, and around half of Denmark's exports go to euro area member states.
From a monetary point of view, most people would therefore agree that there is every reason to pay tribute to ECB on a day like this. |
