Transmission embargo until 9 p . m . ECB time ( C . E . T . ) on Monday , 20 November 2006 Dinner Speech

Ladies and gentlemen, I would like to thank the Oesterreichische Nationalbank and the European Bank for Reconstruction and Development for inviting me to this conference. Vienna is certainly one of the best places in Europe to deliver a speech about the economic and monetary challenges of euro area enlargement. After all, the city serves in so many ways as a bridge between " old " and " new " European Union countries in West and East as well as between current European Union members and candidate and potential candidate countries in the SouthEast of our continent. Let me go back to 1 May 2004. On that day the European Union witnessed its biggest enlargement so far. Ten central European and Mediterranean countries joined the Union. In January 2007 two other countries – Bulgaria and Romania-will follow suit and the European Union will then comprise no less than 27 members. These events mark real milestones in the history of Europe. After more than half a century of political and economic division, the enlargement of the European Union has finally brought economic stability and a hitherto unthinkable degree of political cooperation , based on democracy and the rule of law to large parts of Europe. The enlargement process has been long and involved many efforts both from the then accession countries as well as from the old members of the Union. The new Member States had to undertake far-reaching legal and economic reforms in order to comply with the EU acquis communautaire and to cope with the market pressures of the single market. Although further work still needs to be done, they have significantly liberalised and modernised their economies and now are expanding dynamically. For the old Member States the enlargement meant tougher competition and additional pressures to pursue structural adjustments and intensify innovation. Moreover, in the spirit of solidarity, they supported the enlargement process financially through the EU budget. Enlargement has contributed greatly to growth and employment in the new Member States. This is mainly attributable to strengthened trade and financial integration including significant foreign direct investment flows, and the availability of EU funds. But the old Member States benefit from this process as well. Fears in the old Member States about job losses and downward pressure on wages due to massive migration and the relocation of activity have proved to be exaggerated. At the same time enlargement has created new …