5. 5 million in the nine preceding years. at the same time, the euro area unemployment rate has fallen to its lowest level since the early 1980s. these are encouraging developments, which show that the structural reforms and the degree of wage moderation necessitated by the new economic environment have helped to overcome some of the constraints on growth stemming, in particular, from still rigid and over - regulated markets in a number of economies. the euro is also supporting the deepening of trade and financial linkages across euro area countries. there is clear evidence that the introduction of the single currency and the associated increase in price and cost transparency have promoted both intra - and extra - euro area trade in goods and services. exports and imports of goods and services within the euro area rose from about 31 % of gdp in 1998 to around 40 % in 2007. the completion of a single market for services will further facilitate trade in services. the rate of increase in extraeuro area exports and imports of goods and services even exceeded that in intra - euro area trade, rising from about 32 % of gdp in 1998 to almost 44 % in 2007. extra - euro area trade has, of course, also benefited from a period of strong external demand and increasing integration at a global and european level. all in all, this also proves that we did not build a fortress europe and that regional integration can go hand in hand with increased openness and globalisation. finally, the euro is acting as a catalyst towards a single market in financial services as evidenced by a number of indicators. for instance, euro area cross border holdings of longterm debt securities have risen markedly since the launch of the euro from around 10 % in 1997 to approximately “ 60 % ” in 2005. in a similar vein, between 1997 and 2005 euro area residents doubled their holdings of equity issued in another euro area country, while, at the same time, the share of euro area equity assets held outside the euro area remained much lower and increased only slightly. expanding cross - border investment opportunities enhances the allocation of resources to their best uses. also, the diversification of national income sources will improve the opportunities for smoothing consumption in the face of localised shocks. but complacency would be off mark. the european leaders ’ march 2000 meeting in lisbon recognised that the european economic model was in need of a competitive fix. they launched what came to be known as the lisbon agenda, which set a fully innovative and competitive europe as a ten - year goal. to date

non - financial sectors, both inside and outside the euro area. in addition, low capacity utilisation rates are likely to dampen investment, and unemployment in the euro area is expected to increase somewhat further, thereby lowering consumption growth. for these reasons, the euro area economy is expected to grow only at a moderate pace in 2010 and the recovery process could be uneven. the governing council continues to view the risks to this outlook as broadly balanced. on the upside, there may be stronger than anticipated effects stemming from the extensive macroeconomic stimulus being provided and from other policy measures taken. confidence may also improve further, and the global economy as well as foreign trade may recover more strongly than projected. on the downside, concerns remain relating to a stronger or more protracted than expected negative feedback loop between the real economy and the financial sector, renewed increases in oil and other commodity prices, the intensification of protectionist pressures and the possibility of disruptive market movements related to the correction of global imbalances. with regard to price developments, as expected, euro area annual hicp inflation increased further in december 2009 to stand at 0. 9 %, after 0. 5 % in november. the rise mainly reflects upward base effects stemming mostly from the drop in global energy prices a year ago. inflation is expected to remain around 1 % in the near term. looking further ahead, inflation is expected to remain moderate over the policy - relevant horizon, with overall price, cost and wage developments staying subdued in line with a slow recovery in demand in the euro area and elsewhere. in this context, it is important to emphasise, once again, that inflation expectations over the medium to longer term remain firmly anchored in line with the governing council ’ s aim of keeping inflation rates below, but close to, 2 % over the medium term. risks to this outlook remain broadly balanced. they relate, in particular, to the outlook for economic activity and the evolution of commodity prices. furthermore, increases in indirect taxation and administered prices may be stronger than currently expected owing to the need for fiscal consolidation in the coming years. turning to the monetary analysis, both the annual growth rates of m3 and loans to the private sector were negative in november, standing at – 0. 2 % and – 0. 7 % respectively. the concurrent declines to historically low growth rates recorded in these two series over the past months support the assessment of a decelerating underlying pace of monetary expansion and low inflationary pressures over the medium term. looking ahead