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Ministerial conference on the euro hails introduction of new monetary unit as advance in European integration, stabylity

PARIS– The introduction of the euro as the common currency in 11 European Union countries will lead to rapid growth of the bond market and other financial activity, create a new reserve currency, contribute to Europe's competitiveness and growth prospects, and have positive repercussions around the world, including Latin America and the Caribbean, according to senior government and private sector financial leaders.

The first 100 days of operations of the euro and its prospects for the future were analyzed during a one-day ministerial-level seminar at the Inter-American Development Bank Tuesday as part of a series of conferences at the Bank's Annual Meeting.

IDB President Enrique V. Iglesias, who inaugurated the conference in conjunction with French Finance Minister Dominique Strauss-Kahn, described the introduction of the euro as another major advance in Europe's approach to integration and a possible model for Latin America.

"We are following this very closely," he said.

Eugenio Domingo Solans, a member of the executive board of the European Central Bank, said "the launching has been fully satisfactory." He cautioned that the success or failure of the euro should not be measured in terms of its value compared with other currencies "but in terms of price stability," which he said was "the priority objective.

Charles de Croisset, president of Crédit Commercial de France, said the euro was a "tremendous leap forward" despite high transition costs for the banking sector. He said many banks will be tempted to seek growth through mergers and acquisitions to compete in the new, enlarged, financial market, but he recommended a "niche"approach.

Strauss-Kahn said the euro opens new prospects for growth of a "high-value service" economy in Europe, while Jacques de la Larosière, former president of the European Bank for Reconstruction and Development and former Managing Director of the International Monetary fund, and other speakers predicted an explosive growth of the European bond market and other financial activities.

Jacques Delors, former president of the European Commission, and Roberto Zahler, president of the Board of Siemens of Chile S.A., both supported the idea of common currencies as an eventual objective that can contribute to disciplining and deepening integration processes in Latin America and the Caribbean. Zahler also argued that neither Latin America nor its respective subregions yet exhibited structural conditions for a successful common currency, and he mapped out policy paths that would facilitate eventual convergency to monetary union in integration agreements with deep objectives.

Mexico's Secretary of Finance Angel Gurria Treviño emphasized the importance of structural reforms and sound public financial management as prerequisites to a common currency. "If the structural reforms are completed, the monetary question becomes secondary," he said.

El Salvador Finance Minister Manuel Enrique Hinds and Aquiles Almansi, a director of Argentina's Central Bank, described the U.S. dollar as the de facto currency of Latin America and argued in favor of a currency peg or full dollarization.

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