european central bank press conference introductory statements introductory statements given by mr willem f duisenberg, president of the european central bank, and mr christian noyer, vice - president of the european central bank, at the press conference held in madrid on 30 march 2000. * * * ladies and gentlemen, today, the governing council of the ecb met for the first time outside frankfurt. therefore, let me first of all thank our host, governor rojo, for inviting us to meet in madrid and for the generous hospitality offered to us. the vice - president and i will report on the outcome of today ’ s meeting of the governing council. i should like to take the opportunity of this special meeting to take stock of where we stand 15 months after the start of monetary union. in january 1999 the euro was successfully launched as the single currency for 11 member states of the eu. as a result of very careful conceptual and technical preparations, both the monetary policymaking process and the implementation of monetary policy have functioned efficiently right from the start. the challenges involved in setting up a central bank for a currency area as large as the euro area have been enormous. the eurosystem - which comprises the european central bank and the 11 national central banks of the countries which have adopted the euro - has met these challenges with success. this would not have been possible without a strong willingness to cooperate on the part of the actors involved. i should like to take this opportunity once again to thank all the members of the governing council and the staff of the eurosystem for this. from the start, we had extremely productive and open discussions in the governing council on monetary policy issues. in this respect, our monetary policy strategy has provided a very useful framework within which to organise our thinking. in our discussions there has always been a clear understanding, based on the treaty, that the single monetary policy can only focus on maintaining price stability in the euro area as a whole. this is based on the simple fact that in a monetary union, there is only one monetary policy, and this must be directed to a single objective. as laid down in the treaty, each member of the governing council is therefore well aware that he or she is not a representative of a country or central bank but acts in a personal capacity in deciding the appropriate conduct of monetary policy for the euro area as a whole. the move to the single currency and the introduction of the euro were based on a degree of convergence towards price stability in participating countries that few observers would

of europe or perhaps more than a paradox : a conundrum. why is it that not only we did not improve our productivity when the us did it – around the mid eighties – but that we observed on the contrary a very significant diminishing of our productivity? this phenomenon seems to me only half understood through traditional explanations : the impact of specific policies aiming at drawing back to work a significant number of previously unemployed unskilled workers – with a low level of productivity – that have been launched in several european economies ; and a degree of under - investment hampering the stock of capital allocated to each employee. but it explains only around half of the diminishing of the labour productivity growth. the other half seems to be explained by a significant diminishing of total factor productivity which is extremely surprising because it occurs precisely at the moment of powerful historical surge in science and technology. there we are at the heart of the conundrum. the conjecture i would propose is that, under certain circumstances, in a period of very rapid technological and structural changes, the more an economy is inflexible, the more it resists to these changes, to the extent that far from taking advantages of the acceleration in progress in technology its “ total factor productivity “ growth diminishes in comparison with what it was in the period preceding the surge of technology. in other words it seems that there is not only an “ opportunity cost ” for being inflexible in a period of very rapid technological change – i. e not seizing the new opportunities offered by the acceleration of changes - but also a “ direct cost ”, coming perhaps – and there lies the conjecture - from the fact that under the stress of accelerating changes the economy becomes even more inflexible and hostile to technological progress than in more “ normal times ”. the evolution of the “ total factor productivity ” growth in europe seems to confirm that phenomenon. from an average level of 1. 3 % in the 80 ’ s it diminished to an annual average of 1. 1 % during the 90 ’ s and 0. 7 % between 2000 and 2004. these observations are calling urgently for structural reforms, in particular all the reforms that would augment the flexibility of all markets – labour, goods and services and financial – in the euro area economy. the need for structural reforms understanding the reasons of these developments is very important. as also stressed by the oecd 5, the lack of sufficient structural reform in europe is a major cause of