economic policies would deprive the area of an appropriate policy - mix, and could not be achieved without a political federation. other objections raised were the absence of instruments to respond to any asymmetric shocks, and the european economies'lack of flexibility and real mobility in the labour force. the conclusion was that the euro would never exist! the facts have disproved this conclusion. but the very same arguments are sometimes deployed to suggest that the euro - area economy contains some inconsistencies that could endanger its prosperity. what can we say, from an economic standpoint, on this very important question? firstly, that monetary union per se, and wherever it takes place, does not necessarily imply that, at any given point in time, all the participating countries will experience the same rate of inflation or of growth, even though the move to the euro was based on the successful completion of a convergence process. let us focus, for example, on inflation. present differentials do not appear to be very large, in comparison with the experience of the united states, a long - established monetary union of comparable size. data on major cities of the us shows that inflation differentials have been at times very substantial, with divergences of 7 percentage points being recorded in the early 1980s. in the euro area, long - term convergence to a common level of prices gives naturally rise to differences in inflation rates across emu countries. the convergence of productivity and living standards creates a trend towards price convergence, as a consequence of the commonly known balassa - samuelson effect. according to the imf, this effect is estimated to have contributed 1. 5 - 2. 0 percentage points per annum to inflation for eu countries catching up on productivity. the recent statistics available for the united states also confirm that wage and salary differentials within the euro area are by no means atypical in a monetary union : for example, in the us the average weekly earnings in the non - durable goods sector stood at usd 546 at the national level, while standing at usd 437 in mississippi and usd 644 in new jersey. i am convinced that we can be reasonably confident in the increasing integration of european countries, and in the fact that economic developments are becoming more and more correlated in the area. it has been highlighted, in the academic field, by several empirical investigations that business cycles are becoming more synchronous across europe. secondly it has often been questioned whether emu can be a success without some form

single monetary team, with the ecb acting as a coach and the ncbs as the players on the field, with a single team spirit and this team spirit is one of the priceless assets of the euro area. c / third, the credibility of the eurosystem rests, fundamentally, on its stability - oriented monetary policy strategy. i would like to allay the fears and doubts expressed by some observers as regards the clarity of our monetary policy strategy. the maastricht treaty has given us a mandate for maintaining price stability. we have decided to be as clear and as transparent as possible by announcing a clear definition of price stability, featuring a year - on - year increase in the harmonised index of consumer prices for the euro area of below 2 %. to reach that goal we have based our monetary policy on two “ pillars ”. as regards the first “ pillar ” we have set up a quantitative reference value, namely 4. 5 %, for the growth of the broad monetary aggregate m3 ; we have recently confirmed this rate of growth of 4, 5 % as an important factor for stabilising expectations. it should be noted that the concept of a reference value does not imply a commitment on the part of the eurosystem to mechanistically correct deviations in monetary growth in the short term. however, the reference value for m3 is consistent with, and helps to maintain price stability over the medium term. the second pillar of the monetary policy strategy is a very comprehensive set of indicators that are important in our eyes in signalling future price developments in the euro area. this strategy, which ensures a great deal of continuity with the monetary policies of the participating national central banks, appears to have been understood by financial markets and the public at large. in particular, the yields on long - term bonds denominated in euros indicate clearly that the eurosystem has kept intact the legacy of credibility that it has inherited. d / finally, the credibility of the euro also results from the eurosystem's constant efforts towards transparency and communication. i must stress here that the eurosystem is one of the most transparent central banks in the world. once a month, immediately after the meeting of the governing council, the president of the ecb holds a press conference - which starts with a precise exposition of the diagnosis of the governing council which is immediately made available in real time on the ecb website. this was the case when we met last thursday in frankfurt. st it is extremely