willem f duisenberg : presentation of the ecb ’ s annual report 2002 to the european parliament introductory statement by dr willem f duisenberg, president of the european central bank, at the presentation of the ecb ’ s annual report 2002 to the european parliament, strasbourg, 3 july 2003. * * * it is my pleasure to present to you today the ecb ’ s annual report for 2002, a year that was marked by significant progress on our path towards a more integrated europe. in particular, 2002 saw the successful introduction of the euro in its tangible form, as euro banknotes and coins have been swiftly accepted and embraced by the citizens of the euro area. moreover, heads of state or government, at their summit meeting in december last year, took the historic decision to invite ten countries to join the european union ( eu ) as of 1 may 2004. economic and monetary developments at the same time, the environment in which monetary policy was conducted in 2002 was one of considerable uncertainty. following the slowdown in economic activity throughout 2001, a moderate recovery of real gdp growth in the euro area was recorded at the beginning of 2002. however, as the year progressed, the recovery lost momentum, affected by renewed turbulence in financial markets and geopolitical tensions, which had consequences for oil prices and confidence. overall, annual real gdp growth in the euro area is estimated to have been only 0. 8 % in 2002, compared with 1. 4 % in 2001. despite the subdued pace of real economic growth, hicp inflation remained at 2. 3 % on average in 2002, unchanged from 2001, and slightly above the ecb ’ s definition of price stability. this was partly due to a number of temporary or one - off factors, including higher oil prices, indirect tax increases and adverse weather conditions. on top of this, there were some effects from the cash changeover. while the overall impact of the cash changeover on inflation was small, its perceived impact was much greater than its actual impact, probably due to comparatively strong price increases in some specific sectors. of greater concern for the medium - term outlook for price stability was the fact that nominal wage growth remained relatively strong despite the weakening of economic activity and a rise in unemployment, while productivity growth remained low. this development points to persistent structural rigidities in the labour markets of the euro area. monetary growth was strong in 2002. while this development was partly the result of high volatility in financial markets, which heightened investors ’ preference for

me point out that the national central banks within the eurosystem regularly monitor and analyse macroeconomic, fiscal as well as structural developments in their respective countries, publishing their findings in their monthly, quarterly or annual reports. these analyses clearly enhance our understanding of euro area developments. however, given its euro area focus, it is natural for the ecb to pay greater attention to the euro area perspective in its explanations of the single monetary policy. as mentioned at the beginning of my remarks, we are currently experiencing truly historic developments. the dream of a united europe stretching beyond former post - war rifts is about to become reality. although major challenges lie ahead, as many of the acceding countries are still developing into fully - fledged market economies, i believe that the signing of the accession treaty at the athens summit in april testified to our joint belief in an integrated europe. the clear endorsement of the treaty in the national referendums that have already taken place in a number of acceding countries provides evidence of this commitment. it goes without saying that an enlarged european union will require a number of adaptations in the working procedures and the internal functioning of european institutions and bodies, including a reform of the voting modalities of the governing council. i am well aware of the views that the european parliament has expressed in this regard, but let me again point out that the nice treaty set clear conditions and limits within which our reform proposal had to be formulated. while the adopted changes in the voting modalities are, admittedly, complex, the tried - and - tested principles of the eurosystem constitution, in particular the ad personam participation of governors and the “ one member, one vote ” principle for the members exercising a voting right, have been kept fully intact. this will ensure that, also in a significantly enlarged euro area in the future, the governing council will maintain its capacity for timely and efficient decision - making. upon accession, the new member states will join economic and monetary union with the status of “ countries with a derogation ”, and their central banks will become part of the escb. at a later stage, these central banks will become part of the eurosystem, once their respective countries have fulfilled the convergence criteria for adopting the euro. a key priority of the ecb is to have in place the necessary technical and institutional infrastructure to ensure an orderly enlargement of the escb and, later on, of the eurosystem. an interesting foretaste of the new,