and gas markets or measures such as the eco tax in germany or the tobacco excise duty in ireland may serve as examples of such policy measures. secondly, since patterns of consumption are not the same in all participating countries, the weights used in the construction of the national components of the harmonised index of consumer prices ( hicp ) differ. for example, processed food constitutes around 13. 5 % of the hicp in the euro area as a whole, but 21 % of the hicp in ireland. this could, purely mechanically, generate measured inflation differentials across countries even if price changes for individual goods were equal in all these countries. finally, different weather conditions or different numbers and timing of national holidays can create “ noise ” in measured inflation rates, which would be of only limited economic significance. looking ahead, there is no reason to expect that such factors would disappear within the euro area. in addition, a number of deeper economic factors may also contribute to short - term divergences of price developments. trade patterns, production structures, tax systems, financial markets, and institutional structures differ significantly across euro area countries. hence, common shocks may affect countries in a diverse way. the 1998 / 1999 emerging market crisis, the depreciation of the euro against the us dollar, and the recent surge in oil prices may all serve as examples of common shocks which have contributed to diverging developments within the euro area. furthermore, second - round effects of common shocks may differ because of different institutional structures, such as the wage - bargaining system. of course, the transmission of single monetary policy reactions to such shocks may also still differ because of financial structures. likewise, differences in inflation may occur on account of the impact of asymmetric shocks, or differences in the response to such shocks. german unification was a clear example of such an asymmetric shock. looking ahead, some of these deeper economic factors may become less important as differences in trade patterns, tax systems, financial markets and institutional structures are likely to diminish. others may become more important. in the face of increased openness and trade integration, a tendency towards country - specific and regional specialisation might emerge. this could lead to some inflation divergences between countries when shocks occur. however, to the extent that the linkages between industries increase across national boundaries as part of the process of growing integration in the euro area, the degree of synchronisation across national short - term economic developments may well increase. let me now turn

willem f duisenberg : are different price developments in the euro area a cause for concern? speech by dr willem f duisenberg, president of the european central bank, at the financial services industry association, dublin, on 6 september 2000. * 1. * * introduction ladies and gentlemen, it is a pleasure for me to speak here in dublin on the occasion of the annual dinner of the financial services industry association ( fsia ). public support for the euro in ireland has been particularly strong, and this may be due to the prevailing expectation, stronger than elsewhere, of economic benefits resulting from the single currency. the introduction of the euro, however, also poses some new questions and challenges for the ecb and national economic policymakers. today i should like to take the opportunity to elaborate on one particular issue, that is the challenge posed by different inflation rates across countries or regions within the euro area. there is a general consensus that the euro area economies have experienced a great deal of convergence both in terms of economic growth and inflation during the past decade. in fact, the move to a single currency and the introduction of the euro are based on a successful convergence process towards a high degree of price stability in participating countries. however, this does not mean that countries have always had the same rates of inflation during the past decade. and, indeed, there is no reason to believe that they will - at all times - have the same rates of inflation within monetary union. i am well aware that divergences in inflation have increased lately in the euro area as a whole. for example, inflation in ireland deviates significantly from area - wide inflation. 2. different price developments will not generally disappear there are a number of reasons why differences in economic conditions have occurred in the past, and there is ample reason to expect that some degree of economic divergence will continue to emerge within the euro area. first, there may be reasons why some differences in inflation may occur over relatively short periods of time. second, national or even regional rates of inflation may also differ within a single currency area over longer periods of time. let me elaborate on each of these factors in turn. short - term differences in inflation may generally occur due to country - specific, statistical and “ erratic ” factors. first, government policies may lead to different price developments via tax changes, liberalisation measures and administrative price changes, as they are generally not of the same magnitude and timing across all euro area countries. the deregulation of national electricity