Though still dominant, the international role of the dollar has been on a declining trend as the DEM, Yen, Pound sterling and FRf also assumed an international role. On the eve of the introduction of the euro, the DEM had become an important international currency, though mainly at the regional level as the central currency of the EMS: anchor-, intervention- and reserve currency for the other participants. The ECU also developed a role as international currency, at least until the widening of the ERM fluctuation margins in 1993.
    On 1 January 1999, the euro instantly became an international reserve and intervention currency by inheriting the role held so far by the DEM, FRF and the EW.
    Looking beyond this starting level, the prospects for the euro's further development are promising.
    A major prerequisite is economic weight. The bigger a country, the larger its GDP and the larger its share in world trade On this score, the euro zone compares rather favourably with the U.S. Its population numbers 290 million against 278 million; its GDP amounts to £5,500 billion as against 6,800 billion euro; and it accounts for 18% of world exports as against 15% for the U. S.
   The existence of large, diversified and liquid financial markets in euro also play a key role in the latter's international development. A promising start took place on 4 January, 1999 when EMU's money-, bond- and stock markets began operating in euro. Much more so than the former fragmented national markets they will attract foreign borrowers, lenders, issuers and other operators alike.
    Of course, monetary policy also matters. The ECB's constitutional mandate to ensure price stability will result in a low-inflation euro zone (defined as below 2%). Achieving this target on a durable basis will require a coherent policy-mix between the single monetary policy and the national budgetary policies of EMUs Member States under the umbrella of the Stability and Growth Pact. Depending on the credibility of this happening, another prerequisite for the development of the euro as a major international currency will be met.
    The inertia to change might nevertheless handicap the euro's development. Indeed, the more a currency is used in international transactions of all kind, the more useful and inexpensive it becomes for other potential users. The dollar possesses this so-called "network" advantage.