≈◊ ≈◊ Oesterreichische Nationalbank Oesterreichische Nationalbank Eurosystem Annual Report 2002 Oesterreichische Nationalbank Annual Report 2002 Report Annual Oesterreichische Nationalbank ˆ Report on the Financial Year 2002 with Annual Statement of Accounts 2002 Submitted to the General Meeting on May 15, 2002 Statement When Stage Three of Economic and Mon- changeover was somewhat clouded by etary Union (EMU) commenced in 1999, persistent economic weakness in the wake many people still thought the new Euro- of the tragic events of September 11, pean currency a very abstract and remote 2001. Hopes of a sustained recovery in prospect. This perception changed quickly 2002 were disappointed, as the economy once the euro banknotes and coins had ac- could not shake the negative effects on tually been introduced in 2002. The new growth of high oil prices, the slump on cash was readily adopted as a symbol of world stock markets and pronounced in- the new Europe. vestor uncertainty. Likewise, the Iraq cri- The OeNB considers the circumspect sis heightened uncertainty at the global and comprehensive preparation of the cash level. changeover a key feature of the operations The economic difficulties of Austrias success. Above all, the efficient assign- main trade partner Germany further com- ment of responsibilities among the OeNB pounded the unfavorable economic situa- and its subsidiaries OeBS, the Austrian tion for Austria. Another factor the econ- Mint and GSA contributed importantly omy had to contend with was the sluggish to a smooth execution. The carefully growth of the Italian and Swiss markets, planned course of action made the switch which weighed on Austrian exports. In to the new currency easier for Austrians, this gloomy environment, Austrias close which was reflected by their positive atti- ties to countries in Central and Eastern tude to the euro and high confidence rat- Europe proved to be a boon. The favorable ings for the OeNB in surveys. economic conditions in nearly all acces- The successful changeover has pat- sion countries are a direct advantage for ently shown Austrians that their central Austrias economy, but more importantly, bank, the OeNB — which is now part of they demonstrate this regions progress on the European monetary framework — con- the road to EU accession. tinues to fulfill a number of key tasks. The At this juncture, Austria has a decisive OeNB, its management and its staff repre- role to play as a hub of European East- sent Austrias interests at the international West integration. Our country has the level; in particular, they have a decisive advantage of long-standing ties with the role in monetary policymaking within region, enabling it to contribute signifi- the Eurosystem. One of great strengths cantly to European history in the making. of the European monetary union is its de- In its own interest and for the benefit of a centralized structure. This arrangement unified Europe, Austria must rise to the makes use of the decades of experience challenge its role involves. the individual national central banks have The OeNB may be a small central acquired. Moreover, the ESCB/Eurosystem bank, but it has an important mission in setup is suited to benefiting from national the European integration and enlargement central banks expertise in their own coun- process. The OeNBs expertise on Eastern tries to efficiently prepare and implement Europe and its steadfast commitment in the ESCBÕs policies. This blend of Euro- cooperating with the accession country pean orientation, common management central banks is held in great esteem in and the integration of national structures the Eurosystem. is a fundamental factor in EMUÕs success. The startup of Stage Three of EMU Adolf Wala and the smooth realization of the euro President 4 × Annual Report 2002 Statement The most outstanding event of the 2002 to be geared towards stability and public business year was certainly the smooth finance positions need to be sound, not introduction of euro banknotes and coins least because of the demographic develop- in Austria and 11 other Member States ments in the euro area. Furthermore, of the European Union (EU). In the mean- structural reforms in the labor, goods time, the euro has not only successfully and financial markets that have already established itself next to the U.S. dollar been launched must be pursued resolutely as a sound world and anchor currency, to make the euro area more flexible and but has also become an increasingly famil- resilient to external shocks and to increase iar means of payment for some 300 mil- potential output, which will improve lion European citizens in the euro area growth prospects and foster consumer and thus a tangible expression of Mone- and investor confidence. tary Union. Peoples feel for the value of In an environment of stiffer competi- the euro and the new prices has been im- tion, Austria is also called upon to take proving continuously, and the differences the necessary long-term reform measures between perceived inflation and the statis- to, inter alia, strategically secure the tically measured inflation rate, which were attractiveness of Austria as a business loca- widely discussed in the euro area, have tion and to guarantee the sustainability of been disappearing gradually. The inde- sound public finances and effective health pendence of the Eurosystem, its decen- and pension systems. After the successful tralized structure and the resulting effi- implementation of Monetary Union, the ciency as well as its appropriate monetary EU is now facing the next big challenge policy strategy have crucially contributed of integration: its enlargement by ten to successfully maintaining price stability new Member States. The signing and rat- since the beginning of Monetary Union. ification of the accession treaties will pave However, to be able to fully utilize the the way for the acceding countries to join economic potential of the stability-ori- the EU on May 1, 2004. The prospective ented monetary policy, the euro area EU members have made impressive prog- requires responsible fiscal, structural and ress not only in terms of economic transi- wage policymaking suited to ensuring tion and catching up, but also in terms of the euro areaÕs ability to cope with in- integration. creased international competition and, Before the new Member States can thus, to sustain growth and employment. join Monetary Union, however, they will Adhering to these objectives is particu- participate in the new exchange rate larly important in the prevailing difficult mechanism ERM II and strictly and sus- global economic conditions, as geopoliti- tainably fulfill the legal and economic con- cal tensions have severely aggravated risks vergence criteria. Legal and institutional and as the associated uncertainty has led to aspects and the principle of equality of a further delay in the upswing, an increase all EU Member States as well as economic in financial market volatility and a decline considerations underpin the case for grad- in confidence. Stability-oriented policy ual monetary integration. must meet these challenges at all levels. Monetary Union and the euro have Therefore, the euro area countries have significantly strengthened the euro areaÕs to comply strictly with the Stability and position in the dynamic process of global- Growth Pact, an important part of the in- ization and will continue to play a key role stitutional framework for Monetary as a catalyst for reform and for the further Union. The excessive deficit procedures economic and political integration in recently initiated against some EMU Europe, thus making a vital contribution member countries in line with the rele- to preserving peace and prosperity in vant provisions of the Treaty have Europe. strengthened the credibility of the Stabil- ity and Growth Pact. Now more than ever, Klaus Liebscher prudence dictates that fiscal policies need Governor Annual Report 2002 × 5 Contents General Council (Generalrat), State Commissioner, Governing Board (Direktorium), Personnel Changes, Organizational Structure of the Bank General Council (Generalrat), State Commissioner 10 Governing Board (Direktorium), Personnel Changes 11 Organization Chart 12 Report of the Governing Board (Direktorium) for the Financial Year 2002 The Euro: A Success in Its First Year 16 Positive Expectations Met 16 OeNB Information Campaign and Targeted Public Relations Activities Boost Confidence 19 Stability-Oriented Monetary Policymaking in Times of Weak Economic Activity 21 Eurosystem Monetary Policy 21 Euro Area Economic Activity in an Unfavorable International Environment 29 Austria: Slowdown in Growth, Marginal Current Account Surplus 35 The OeNBs Role in Maintaining Financial Stability 42 The OeNBs Activities to Maintain Financial Stability 42 Heterogeneous Developments Pose a Challenge to the Austrian Financial Sector 42 The OeNBs Role in Prudential Supervision 44 OeNB Legally Entrusted with Payment Systems Oversight 45 The OeNB as a Provider of Macroeconomic and Financial Market Statistics 46 The OeNB as a Dialogue Partner in the Basel II Process 48 Initiatives to Strengthen the Financial System 50 The OeNB and EU Enlargement 52 Economic and Institutional Framework Conditions in the Accession Countries 52 OeNB Activities in the Enlargement Process 55 New Tasks for the OeNB in Cashless Payments 58 Road Map for the Establishment of a Single European Payment Area 58 Dynamic Developments in Payment Instruments and Payment Systems 59 Efficient Payment Infrastructure