The success of the European common currency in international financial markets will hinge on the European Central Bank, said Federal Reserve Chairman Alan Greenspan.

"The extent of the potential competitiveness of the euro as an international currency will depend crucially on the credibility of the European Central Bank," Mr. Greenspan said, speaking to a European banking conference in Frankfurt via satellite from Washington.

The bank will set monetary policy for Germany, France, Italy, Spain, Portugal, the Netherlands, Belgium, Finland, Luxembourg, Ireland, and Austria starting in January, when those countries lock their exchange rates together and form a common currency.

Mr. Greenspan, serving on a panel about the euro with other central bankers from around the world, did not discuss his views on the state of the U.S. economy or interest rates.

However, the Fed chairman did say, as he has before, that U.S. credit spreads have narrowed. U.S. central bankers have been keeping a close watch on the markets to make sure financial companies are not losing their ability to finance growth. The Fed cited market conditions in statements accompanying its three interest rate cuts over the past seven weeks.

"We have seen a fairly dramatic shift toward risk aversion, especially since the Russian default on Aug. 17," Mr. Greenspan said, echoing comments he made earlier this month before the most recent interest rate reduction."There's been a significant partial reversal of the extremes of that risk aversion."

Credit spreads have narrowed, as Mr. Greenspan said. The difference between the average yield on 10-year, A-rated corporate bonds and the 10- year Treasury note was 113 basis points on Thursday. While that is below the 128-basis-point peak spread from mid-October, it is above the 80- to 90-point spread central bankers would like to see.

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