If the process of European monetary integration remains on schedule, January 1, 1999 will see the beginning of the union of currencies of economically and financially diverse European countries. Regardless of the precise number of countries that initially join, a European EMU of any size will pose challenges, opportunities, and risks for both private and official participants in European and international financial markets. Although the introduction of the euro is a significant step toward European financial integration, it is by itself only one step in a long process. Previous steps have included, in the area of monetary and exchange rate policy, the creation of the EMS with the ERM, and the Basle/Nyborg agreement; and in the area of financial integration, the adoption and ongoing implementation of the EU Second Banking, Capital Adequacy, Investment Services, and other financial directives.