and giving an orientation to the discussions on monetary policy in the euro area. the eurosystem considers the experience with this two - pillar strategy to have been very positive, looking back on the first year of its operation. the prominent role attributed to money, the first pillar, underpinned by the definition of a reference value for the annual rate of growth of m3, has been an important signpost for the considerations and decisions of the governing council, given the favourable empirical evidence that money is a leading indicator of future price developments. accordingly, the governing council confirmed in december 1999 that it would continue to analyse monetary developments against the reference value for m3 growth of 4½ %. similarly, the use of information from other, non - monetary indicators under the second pillar of the monetary policy strategy has enabled the governing council to cross - check appropriately and to complement the information content of monetary aggregates and to take into account relevant information from various other sources in assessing the outlook for price stability. given the uncertainty in which monetary policy operates - and this uncertainty is particularly relevant at the start of stage three - the two - pillar approach is, in our view, the most appropriate way in which to exploit the available information from both monetary and real indicators and thereby to provide a sound basis for monetary policy decisions. beyond that, this is probably also the most transparent means of explaining these monetary policy decisions to the markets and to the public at large. at the current juncture, the outlook for the euro area economy is very favourable. we should, however, remember that the situation was quite different at the start of stage three. the financial crises which occurred in several emerging market economies had significantly worsened the outlook for economic growth in the euro area in late 1998. as the weakening outlook for economic activity implied downside risks to price stability at a time when inflation rates were below 1 %, the governing council decided in april 1999 to reduce the ecb interest rates in a precautionary manner. at that time, developments in m3 were only slightly above the reference value and, also taking account of the uncertainties related to the analysis of monetary developments at the start of stage three of emu, these developments were therefore not considered as pointing to upward risks to price stability. in the following months, however, the subdued climate was replaced by a gradually improving economic environment. at the same time, upward pressures on consumer prices arose, mainly as a result of the increase in import prices, driven by rising oil prices and the de

christian noyer : presentation of the european central bank annual report introductory statement by mr christian noyer, vice - president of the european central bank, to the committee on economic and monetary affairs of the european parliament, brussels, 17 april 2000. * * * it is my pleasure to present today the second annual report of the european central bank ( ecb ). even though it is the second annual report to be drawn up under the ecb ’ s responsibility, it is also a “ first ” in that it gives an account of the eurosystem ’ s activities during the first year since responsibility for monetary policy in the euro area was conferred upon the eurosystem on 1 january 1999. accordingly, it will come as no surprise to you that the substance of this second report is fundamentally different. the focus is no longer on blueprints for an efficient operational and institutional set - up of the eurosystem and the european system of central banks ( escb ). rather, it comments on the effective implementation of instruments and procedures as well as on the actual pursuit of the various tasks of the eurosystem, notably the conduct of a single monetary policy for the euro area. indeed, for the first time, this annual report gives a comprehensive account of the effective conduct of policies under the responsibility of the eurosystem. it complements, as a specific instrument of accountability, the regular quarterly hearings before your committee. however, at variance with this regular dialogue, its main focus is not on topical issues, but rather on past developments. indeed, the annual report provides a comprehensive account to the european parliament, as the only directly elected european institution, and to the other addressees, including the eu council, the european commission and, more generally, the wider public. it covers the full range of activities that the eurosystem carried out in 1999 with regard to the fulfilment of the tasks assigned to it by the treaty establishing the european community ( the treaty ), with the maintenance of price stability within the euro area at its core. accordingly, the report comments in detail on the achievement of this primary objective and the monetary policy pursued to this end under the prevailing overall economic conditions. moreover, it reports quite extensively on the other tasks and responsibilities of the eurosystem, for instance in the fields of payment and security settlement systems, financial stability and prudential supervision, the preparation of the introduction of euro banknotes and the eurosystem ’ s role in european and international cooperation.