Certain temporary or cyclical factors have contributed to the EURO's early weakness. One is the very strong performance of the US economy, which has made the dollar relatively strong against most other currencies, including the EURO. Another is the fact that EURO notes and coin are not yet in circulation, meaning there is very little real demand for the currency; less than one percent of eurozone payments are currently conducted in EUROs, but this figure will rise to 100% on 1 January 2002. Uncertainty over EU enlargement, meanwhile, has also not helped the EURO's performance to date.

But in the longer term, the value of the EURO will reflect economic fundamentals in the eurozone, and in particular the macro-economic and structural policies that support them. Monetary and fiscal policies will play a key role in this regard. But structural reforms are also critical. Further progress in integrating European financial markets s a key structural reform that is vitally important to the EURO's development.

Monetary union has already brought dramatic change to European financial markets. For example, the corporate bond market in Europe has exploded over the past 18 months as the supply of new government bonds has diminished and as corporate issuers can now tap into investor demand in a single currency area. Technology, meanwhile, is also revolutionising financial markets in Europe and globally.

By contrast, legal and regulatory reforms that are critical to completing financial market integration in Europe have lagged far behind these dramatic market developments.

The European Commission's creation of the Financial Services Action Plan and the political commitment that has been given to fulfilling its aspirations no later than 2005 respond to this. However, after many years of discussion and planning, markets are now looking for tangible actions to deliver on these aims.

The European Parliament has an important role to play in facilitating the fulfilment of the Action Plan. Integration of wholesale markets and the development of open and secure retail services are urgent. A number of legislative initiatives requiring speedy action are coming on to the agenda of Parliament, including a revised Investment Services Directive, proposed directives on collateral, prospectuses and supplementary pensions, and pending proposals on UCITS (collective investment funds).

Rapid action on consolidating the single market for financial services, combined with appropriate fiscal and monetary policies and other structural reforms, will ensure that the EURO becomes the strong, stable currency over the long term that the institutions and citizens of Europe expect.