integration of capital markets across eu countries can also give a substantial contribution to strengthening the productive capacity of european economies. moreover, a deeply integrated euro area - wide capital market would help to insure against country - specific shocks. in addition, reducing market entry barriers and regulation and a sound corporate governance framework improves the availability of venture capital, which constitutes the backbone of highly innovative enterprises, and would overall reduce capital costs and strengthen investment. let me also mention that, despite much progress in this area, additional effort should be undertaken to reduce and eliminate still existing entry barriers and market regulations on product markets. while substantial progress has been made, notably in some of the very important network industries such as telecommunications, but recently also on the electricity market where some countries already benefited from substantial price decreases, some areas are still characterised by dominant market incumbents, public ownership and market entry regulation. moreover, still persisting state - aid for particular sectors or on an ad - hoc basis do not create the necessary environment for dynamic product markets with rapid firm entry and exit that is vital for sustained productivity and output growth. these efforts to push through a further product market reform agenda should be complemented by investments in the technological capabilities of euro area countries. in particular in comparison with the us, it becomes clear that the euro area countries display a substantial gap in the introduction and use of ict. there is an urgent need to reduce the gap that has opened up in this area. finally, more energy has to be invested in order to reduce the stubbornly high impediments for cross - country trade, in particular in the services sectors, which are very important for employment creation. here, we are still far from the single market ideal, which would allow resources to flow freely from one country to another. this requires a further reduction in bureaucratic obstacles and - where necessary – the harmonisation of regulations across countries. the creation of the euro as a structural reform integration of the single market and emu as a catalyst of further reforms these impediments and obstacles notwithstanding, the introduction of the euro has been a structural reform by itself that is likely to contribute to further economic integration of the economies belonging to the economic and monetary union and to foster the continuous development of the single market. for instance, countries with the same currency tend to trade more with each other than they would with countries with different currencies. by increasing price transparency, reducing transaction costs and fostering competition, the euro acts as a powerful catalyst to the economic integration

reaction with respect to country - specific shocks will tend to reduce the contractual length for wage accords, helping to reduce nominal and real wage inertia. overall, therefore, the introduction of the euro in supporting efforts to increase the flexibility of product and labour markets and to make prices and wages reflect more rapidly a change in the economic environment of the euro area. this should improve incentives to invest in new technologies to boost productivity and output growth and to speed up the transformation of the euro area towards a “ dynamic, knowledge - based economy ”. the way forward the lisbon agenda in order to proceed with the necessary structural reforms in the euro area, the lisbon agenda continues to provide an important benchmark against which to measure progress with reforms. the lisbon agenda has been put together in order to formulate a strategic goal for the european union, bringing together the different strands of reform policies on product, labour and capital markets that are already undertaken for some time. moreover, in order to facilitate monitoring of progress with reforms, quantitative goals have been fixed to measure progress in particular on the labour market in achieving for instance a higher employment rate or increasing labour market participation of women. the goal that has been fixed at the time - to become the most competitive and dynamic knowledge - based economy by 2010 - seems increasingly difficult to reach. in addition to efforts that have to be undertaken on the individual country level, it seems to me necessary to strengthen the european framework through which reforms are monitored and accompanied in order to improve incentives for more rapid transposition of reforms. let me first briefly summarise the main points of the lisbon agenda before turning to the question of how the benchmarking and monitoring process could be strengthened. in particular, the lisbon agenda stresses the following reforms necessary for an increased flexibility on product, labour and capital markets : • a further integration of capital markets should be pursued. here, the implementation of the action plan for financial services by the end of 2005 will help to improve access for venture capital by reducing intra - eu barriers to capital transfers. this implies to integrate the market for government bonds, to harmonise accounting standards and to enhance co - operation between financial services regulators in different eu countries. • on product markets, the lisbon agenda stresses a further strengthening of the competition intensity, and in particular a further opening of electricity and gas markets across eu countries. let us observe that in order to measure the speed at which eu directives are transposed into national law, a transposition rate has been defined at set at