positively to the functioning of the eu. jurgen von hagen ’ s presentation complements gerard roland ’ s presentation. his findings also support the macroeconomic stabilisation achieved by the new member states. on top of that most of the new member states have undertaken major reforms to restructure their public sectors. spending ratios have fallen remarkably and public sectors operate in a much more efficient manner than previously, but there still seems to be room for improvement. a well structured public sector and sound fiscal policy are necessary ingredients for a successful participation in a monetary union today and in the future. jurgen von hagen also commented on the future adoption of the euro and i will shortly touch upon this topic later in my speech. doug laxton and michael kumhof ’ s presentation today dealt with the macroeconomic performance of the new member states, or more specifically the performance of the czech republic, from a different angle than the two other presentations. it is an extremely challenging task to utilise a modern structural dynamic ( stochastic ) general equilibrium model to study the pros and cons for a country to join emu. i think the authors have done a good job in their brave attempt. because of the nature of the model, in theory, one is able to get a coherent picture about the costs and benefits of joining emu. in the analysis the authors concentrate on the trade sector where trade is determined endogenously between the two countries. the results from their exercise are intuitive and mostly convincing. a reduction in trade costs creates a significant long - term increase in trade and most importantly the main winners will be the joining members. the single currency will lower uncertainties and costs of transferring money. eventually this will lead to welfare gains. i share the view of commentators that the exact values of outcomes are not that important because of the uncertainties involved in numerical exercises utilising macro models. what is important is to show the basic outcomes and most likely scenarios. i also share the point raised by the commentators that inclusion of analysis of financial integration ’ s effect on welfare would be beneficial. in his speech, my colleague, otmar issing, talked about eu enlargement and monetary integration. the adoption of the euro by the new member states will be the final step in monetary integration. as otmar mentioned, a sufficient degree of economic and financial integration is necessary for adopting the euro successfully. fulfilling the maastricht criteria is a sign that sustainable convergence has been reached and countries are on the right path

of 0. 5 % in the previous quarter. the outcome for the second quarter reflected positive contributions from both domestic demand and net exports. the most recent survey indicators point to a broadly similar pace of real gdp growth in the third quarter of the year. overall, we expect the economic recovery to continue, albeit dampened, in particular, by weaker than expected foreign demand. domestic demand should be further supported by our monetary policy measures and their favorable impact on financial conditions, as well as by the progress made with fiscal consolidation and structural reforms. moreover, the decline in oil prices should provide support for households ’ real disposable income and corporate profitability and, therefore, private consumption and investment. however, the recovery in domestic demand in the euro area continues to be hampered by the necessary balance sheet adjustments in a number of sectors and the sluggish pace of implementation of structural reforms. the risks to the euro area growth outlook remain on the downside, reflecting in particular the heightened uncertainties regarding developments in emerging market economies, which have the potential to further weigh on global growth and foreign demand for euro area exports. increased uncertainty has recently manifested itself in financial market developments, which may have negative repercussions for euro area domestic demand. bis central bankers ’ speeches according to eurostat, euro area annual hicp inflation was – 0. 1 % in september 2015, down from 0. 1 % in august. compared with the previous month, this mainly reflects a further decline in energy price inflation. on the basis of the information available and current oil futures prices, annual hicp inflation rates will remain very low in the near term. annual hicp inflation is expected to rise at the turn of the year, also on account of base effects associated with the fall in oil prices in late 2014. inflation rates are foreseen to pick up further during 2016 and 2017, supported by the expected economic recovery, the pass - through of past declines in the euro exchange rate and the assumption of somewhat higher oil prices in the years ahead as currently reflected in oil futures markets. however, there are risks stemming from the economic outlook and from financial and commodity market developments which could further slow down the gradual increase in inflation rates towards levels closer to 2 %. these risks are being closely monitored by the governing council. turning to the monetary analysis, recent data confirm solid growth in broad money ( m3 ), notwithstanding a decline in the annual growth rate of m3 to 4. 8 % in august 2015 from 5. 3 %