Having said that, the ECB would welcome an increase of the already substantial contribution of the euro area to global economic growth. However, this should be achieved in a lasting way, by increasing the growth potential of the euro area. The growth potential of an economy, however, is determined by technological and structural factors. Raising its growth potential is an important challenge that the euro area faces, achievement of which would spread its benefits throughout the world. While some reforms have already taken place, additional efforts are needed. Ongoing comprehensive structural reforms of the labour and product markets remain essential in order to improve the functioning of markets in the euro area. Responsibility for these reforms lies with the governments, and with the key national economic agents on the side of labour and industry. It is crucial to increase investment incentives through structural policy measures such as deregulation and privatisation. Fiscal policy should continue along the path of diminishing adverse incentives provided by tax, benefit and pension systems, while reforms on the expenditure side of the budget are also needed for progress along the way towards the medium-term objective of attaining budgetary positions "close to balance or in surplus". To sum up, although monetary policy cannot lift the euro area's growth potential, the benefits of price stability for growth are evident, as stable prices provide the proper environment for structural reforms to work.

By unambiguously assigning the primary objective of price stability to an independent central bank, the Treaty recognises that focusing monetary policy on the maintenance of price stability in the euro area ensures that monetary policy will make the best possible contribution to improving economic prospects. This view is rooted in the fact, supported by decades of practical experience and empirical evidence, that the benefits of price stability for growth are substantial. Without putting forward all the arguments, allow me to highlight, in particular, that the maintenance of price stability helps to allocate resources efficiently both across uses and across time. Inflation causes economic agents to confuse transitory with permanent price changes, and therefore distorts their decision-making process. In evaluating investment opportunities, firms need to have confidence in the signals conveyed by relative price changes, and to discriminate between relative price adjustments and general changes in the overall price level. This process is facilitated in a situation of overall price stability. Price stability therefore improves the transparency of the relative price mechanism and can promote an adequate environment to increasing the growth potential of the euro area economy. Moreover, as experience has shown, stable prices minimise the inflation risk premium, thereby lowering long-term interest rates and helping to stimulate investment and growth. In order to maintain price stability, the ECB has designed a monetary policy strategy wherein risks to price stability are assessed on the basis of two pillars. The first pillar assigns a prominent role to monetary developments.