that the developments of all member states'public finances are continuously scrutinised in detail by the ecofin council implies peer pressure and shared responsibility. increasing competition together with this shared responsibility has also strengthened the incentives to improve the efficiency and viability of public sector, labour markets and pension system structures. at present, there are no major imbalances in the euro area which would require long - term adjustment. economic policies in the euro area as a whole remain geared towards price stability, the objectives of the stability and growth pact, wage moderation and structural reform. further positive effects on economic growth should stem from the impact of tax reductions in several member countries and from the fact that financing conditions are favourable. thus, while it is natural for an economic slowdown to have adverse effects on member states ’ budgets, it is important that especially those countries with a budget position still not close to balance or in surplus and / or with high public debt - to - gdp ratios adhere to their medium - term consolidation plans. the current slowdown should not substantially change the scope for reaching the medium - term commitments they made under the stability and growth pact and in the context of their stability programmes. a medium - term perspective and continuous consolidation are essential for the conduct of fiscal policy in all euro area countries. this would give a firm signal to investors and consumers, thereby supporting confidence and contributing to a recovery. while it may be perceived as more difficult to advance in these areas in an environment of weaker economic activity, the need to properly address rigidities should be much more obvious now than at times of buoyant growth. the current weakness should therefore be taken as a challenge to be met by stepping up reforms rather than allowing efforts to abate. stability anchor finally, let me turn to the fifth stability aspect. emu and the euro are an anchor for stability for central and eastern european countries ( ceecs ), among them several applicants for eu accession. a more detailed analysis shows that the euro has become particularly important as a unit of account in international goods and service trade in the ceecs. moreover, the euro is likely to play an ever larger role on the central and eastern european forex markets. the same is true of the euro as an investment and issuing currency for private users in the ceecs and, in the longer term, for pricing of goods and on the stock exchange. even today, the euro is a key currency for central and eastern europe. in most of the ceecs

, and canada was an early adopter. under our current agreement, we aim to keep inflation around a target of 2 per cent, and we usually try to accomplish this over six to eight quarters. even in the absence of financial stability threats, the practice of monetary policy requires the central banker to deal with vast amounts of uncertainty. think of the most important aspects of a macroeconomic model – the level and growth rate of potential output, the real neutral interest rate, and the transmission of terms - of - trade shocks. none of these can be observed ; they all must be estimated. the assumptions that we make in running our models inject uncertainty throughout the policy - making process. and, since the crisis, we have also been confronted with the risk that our models have been distorted because of fundamental shifts in economic behaviour. now, on top of all this uncertainty, we have to add the uncertainty represented by risks to financial stability, a concept that is difficult to quantify. adding this whole other dimension of uncertainty complicates the practice of monetary policy by forcing us to weigh both sets of risks, the probabilities that they will be realized and the potential consequences of a policy error. so how do we manage the risks? at the bank of canada, we try to be realistic about the things we don ’ t know and do a thorough examination of the related risks. every time we come to a decision, there are a number of potential paths for policy that could be consistent with the inflation goal. in the process of formulating policy, we weigh these possibilities and focus on those that fall into a zone where the range of likely outcomes makes us reasonably certain that we ’ ll achieve the inflation target over an acceptable time frame and that financial stability risks will evolve in a constructive way. bis central bankers ’ speeches still, we know there can be times when setting policy to achieve the inflation target within the usual time frame can increase the level of financial stability risk to an unacceptable level. this would take us out of the zone where the risks are essentially balanced. because the flexibility in our framework allows it, we reserve the right to choose our policy tactics so that our actions don ’ t significantly worsen financial stability concerns by opting for a policy path that aims to return inflation to target over a longer time frame than normal. risk management, then, does not mean that the central bank will adjust policy to try to lean against every emerging financial imbalance. since we are an inflation - targeting central bank