 You're listening to the ECB podcast, bringing you insights into the world of economics and central banking. My name is Katie Ranger. This year, the ECB turns 25. As part of the celebrations, our President Christine Lagarde looked back at the story of the euro, including its role in uniting people across Europe. She also explored what the next chapter could hold. The euro is yours, and the ECB acts for you. It is a pleasure to welcome all of you to this reception marking the 25th anniversary of the ECB and the euro system. It was Helmut Kohl, former German Chancellor, who famously observed that peace means more than just an absence of war. And at its root, the story of the euro is one of building the foundation for lasting peace. It is a story that stems from Europe's far-sighted decision after the Second World War to bind its economies together so tightly that our future would be inseparable, and which in turn created the most powerful logic underpinning European integration. This engine of integration meant that whenever we faced trials, we did not retreat into division and let what we had built together fail. Instead, laboriously on occasion, we met those challenges head-on and together. And it was this same spirit that made from the late 80s onwards the single currency a necessary next step on our European journey, irreversible. But remember those days. At that time, both Europe and the world were changing. First, our common market was evolving into the single market. This made it even more important to remove the prospect of competitive devaluations among major economies, since that would have undermined trust and turned the tide against openness. But with global capital flows multiplying, Europe's fixed exchange rate system was becoming increasingly unstable, a problem epitomized by the exchange rate mechanism crisis in 1992, 1993. Second, the global integration of finance was also threatened in Europeans with the loss of monetary sovereignty. The monetary policies of large countries that issued global currencies, especially the United States, were exerting ever larger global effects. Regardless of the exchange rate regime used, this meant that the scope for smaller countries to set monetary conditions in line with their domestic needs was gradually narrowing. Third, and I should have started with that, as the Berlin Wall fell and the Cold War ended, there were new fundamental questions about the direction of Europe and who would hole sway within it. And that created a powerful need for new European symbols that could tie people within a larger and more diverse union. The Euro was the logical answer to all three of these changes. It offered Europeans stability, sovereignty and solidarity. And the Euro delivered stability, sovereignty and solidarity through crisis, the crisis. And we can be grateful for the full sight of Europe's visionary founders when the Euro was born on January 1, 1999, when we all remember exactly what we were doing those days. The founders could never have imagined the crisis that lay ahead. The first president of the ECB, William Duesenberg, late win, faced September 11 and the dot-com crisis. His successor, President Jean-Claude Trichet, thank you Jean-Claude for being here tonight, had to navigate the global financial crisis and face the sovereign debt crisis in its early days. Which my predecessor, President Mario Draghi, thank you Mario for being with us, inherited and he had to contend with fears about the very future of the Euro area, followed by a prolonged period of too low inflation. And my own presidency has already seen the pandemic and economic lockdown, Russia's brutal and acceptable invasion of Ukraine, the energy crisis and the return of way too high inflation. Yet the fundamental promise of the Euro has held true. And thanks in no small part to our monetary union, we've been able to weather it all and come out just a bit stronger each and every step of the way. First, the Euro has brought us stability. With stable exchange rate, the single market and the commitment to peace that it represents has not only survived, but it has thrived. One can only imagine how tempting protectionism would have been if the possibility of competitive devaluations had not been eradicated. The Euro has also shielded us from external shocks. Soon after its launch, it quickly established itself as the world's second reserve and invoicing currency to this day still holds this position. As a result, the price of more than half of what we trade is now denominated in Euro. And for the other half, the single currency has helped insulate the economy from excessive exchange rate volatility. According to ECB staff estimates, had the Euro not been introduced, the depreciation of some Euro area countries, which will remain unnamed against the US dollar, could have been up to 14% larger during the great financial crisis and up to 10% larger during the pandemic. Of course, instability has arisen in other areas that were missing from the original design of the Euro area, most painfully during the sovereign debt crisis. But where some of the gaps have appeared, they have been filled, most importantly through the creation of European banking supervision. The Euro has increased our sovereignty, allowing us to be the master of our own economic destiny and to set the monetary policy that Europe needs for stable prices and sustained growth. Thanks to our single monetary policy, ECB has been able to respond quickly and decisively to every kind of shock we have faced. And we have done so even when other large jurisdictions were pulling in a different direction. And this was perhaps most visible when the US Federal Reserve System began a tightening cycle in 2013, while the Euro area was still recovering from the sovereign debt crisis. Our policy independence allowed us to chart our own course and begin a recovery that lasted for 26 straight quarters. Third, the Euro has created solidarity within Europe. It has provided a symbol of unity through incredibly testing times and motivation to support each other through the darkest of hours. And for these reasons, new countries continue to join. Over the past 25 years, we have welcomed nine new members to the Euro area, bringing us from the 11 original to 20 with the most recent Croatia joining at the start of this year. And this is not the end of the journey. We have now reached a position where people can actually separate institutions from policies which in my view is the hallmark of success. They may like or dislike the policies of the ECB, but they mostly no longer question whether being part of the Euro area is the right choice. While the share of people who support the Euro hit a low at around 60% during the sovereign crisis, that figure is now close to 80%. And the depth of this support has also been demonstrated at the ballot box whenever membership of the Euro area has featured in national elections. Does that mean that work is done? We can rest on our laurels? No. It means that we are now in a position to make the best choices for our monetary union rather than about having a union at all. It is now time for the next chapter in the Euro story to be written. And that will depend on the actions that we as Europeans undertake. We all of us. For the ECB our immediate and overriding priority will be to bring inflation back down to our 2% medium term target in a timely manner. And we will do so. But as I recently said, faced with shifting geopolitics, digital transformations and the threat of a changing climate, there will be more challenges ahead which the ECB will need to address. We must continue to provide stability in a world that is anything but stable. And we are also counting on other policymakers to do their part. A monetary union is not an endpoint. It is a constant process of uniting. Each generation of leaders must continue it. Union should be multifaceted and include fiscal, financial and banking dimensions to develop a higher degree of integration, especially if the Euro is to cement its international status. When Wim Duesenberg accepted the Schalemann price on behalf of the Euro in 2002, he portrayed the Euro as a triple contract. It is a contract between countries to pull their strength, a contract between the ECB and the people of Europe to deliver on their needs, most of all price stability, and a contract between Europeans themselves to share their common currency, so he said. But a contract does not only grant rights, it also assigns responsibilities. And now it is up to all of us, leaders, institutions and citizens, to continue to honour this contract for many years to come. Well that brings us to the end of this very special episode for the ECB's 25th anniversary, featuring a speech our President Christine Lagarde gave at the official celebrations. Listeners be sure to check out the show notes for more on this topic. You've been listening to the ECB podcast with Katie Ranger. If you like what you've heard, please subscribe and leave us a review. Until next time, thanks for listening.