Europe's single currency was launched a bit more than a year ago for eleven of the fifteen countries of the Union. This study assesses economic developments and policies during the inaugural year of the new regime. It analyses the economic performance and prospects of the euro area as a whole, and highlights to what extent aggregate trends are shaped by convergence or divergence at national or regional levels. Macroeconomic policies are discussed in depth. The common monetary policy carried out by the Eurosystem and the underlying framework are scrutinised, as is the co-ordination of national fiscal policies against the background of the Stability and Growth Pact. A special chapter is devoted to the links between structural features and policies on the one hand and macroeconomic performance on the other. It argues that broad-based and properly designed structural reforms would boost Europe's economic potential significantly and ease macroeconomic policy trade-offs. A number of highly topical issues are addressed, such as: - How fast is growth picking up and unemployment declining in the euro area? - Why did the euro weaken in 1999 and does it matter? - How effectively was monetary policy conducted? - What degree of fiscal prudence is needed over the next few years? - Which rigidities continue to stunt growth in Europe? This is the second OECD study on EMU, following the one published in early 1999 under the title EMU: Facts, Challenges and Policies.