In a few weeks, the historic step of introducing the European Monetary Union will create a new environment for monetary policy in Europe. The participating countries will be affected, but also the countries remaining outside.

In Switzerland, we see the appearance of the euro as a unique chance for Europe to promote monetary stability. A more stable monetary regime will be beneficial to everybody and will promote transparency and efficiency. We expect the Swiss franc to play a less important role as a transaction currency and the euro to be accepted as a means of payment within our country.

Being a revolution, the introduction of the euro will be a source of uncertainty. But, as soon as the European Central Bank will be well established, we will have a good chance of seeing lower exchange rate volatility and lower interest rate differential between the franc and the euro. In the long run, given the strong correlation of economic fundamentals between Euroland and Switzerland, the foreign exchange market will consider the euro and the Swiss franc as two sister currencies.