Mr Noyer evaluates the role of the euro as a new stable currency for Europe
Speech delivered by Mr Christian Noyer, Vice-President of the European Central Bank, at the “Seminar on the euro” organised by the European Union Chamber of Commerce in Korea and the Federation of Korean Industries in Seoul and Pusan, Korea on 7 and 8 July 1999.
"...Among the important determinants of the international role of the euro two factors stand out, namely the size of the financial market and confidence in the currency. It is widely recognised that a large degree of openness of domestic financial markets normally also leads to a substantial use of the currency by foreign investors. At the same time country-specific risk features such as political risks can reduce the international use of the currency. Let me emphasise that the euro is backed by an environment of monetary stability with a medium-term orientation and which may be seen as providing sound conditions for the further enhancement of the international role of the euro..."
"...The euro can also be expected to become an attractive currency for the investment of official reserves. Moreover, available information concerning the private use of the euro as a currency of denomination for debt securities indicates a significant increase in the share of international debt markets in the first quarter of 1999. This supports the view that in the medium term financial markets see the euro as a stable currency. Moreover, it is widely recognised that in the medium to long term exchange rates follow a path determined by fundamental factors such as price and economic developments. Thus, internal price stability should serve as an anchor for the development of the euro’s external value in the medium term. Indeed, a stability-oriented monetary policy protecting the purchasing power of the euro is the basis of a solid and stable currency over the medium term.
As yet it is too early to predict how long it will take for the euro to be considered as a truly international currency similar to the US dollar. The Eurosystem neither promotes nor hinders the development of the euro as an international currency. We consider that the international role of the euro should develop through the interaction of market forces..."