. foremost among these challenges is the need to strengthen public finances by correcting excessive deficits swiftly and returning to a path of vigorous fiscal consolidation. moreover, throughout the european union there is a need to address the considerable challenges that population ageing poses to existing pension and social security systems. there is also a need to now bring the ongoing discussions surrounding the european fiscal framework to a convincing conclusion which builds trust and confidence. the existing fiscal framework enshrined in the treaty and the stability and growth pact is a cornerstone of economic and monetary union and thus of central importance for anchoring expectations of fiscal discipline. the governing council is convinced that improvements in the implementation of the pact are possible. at the same time, it reiterates its position that it would be counterproductive to change the regulations, dilute the 3 % deficit limit or weaken the excessive deficit procedure. turning to structural policies, the forthcoming mid - term review of the lisbon agenda provides an opportunity to give renewed impetus to structural reform in the euro area, as called for by the recently published kok report. we strongly support a reform agenda which focuses on raising employment growth, fostering investment and stimulating innovation and productivity. progress in this direction will not only enhance the underlying growth potential of the euro area economy over the medium term, but will also help to bolster consumer and business confidence over a shorter horizon. we are now at your disposal for questions.

have diminished somewhat over recent weeks. as regards exchange rates, we confirm our position, expressed when the euro rose sharply, that such moves are unwelcome and undesirable for economic growth. turning to prices, annual hicp inflation was 2. 3 % in december according to eurostat ’ s flash estimate, up from 2. 2 % in november. annual hicp inflation rates of above 2 % are likely to persist over the coming months, notwithstanding the recent oil price decline. looking further ahead, however, the available information indicates that, barring further adverse shocks, hicp inflation will fall below 2 % in the course of 2005. moreover, the latest indicators do not suggest that underlying domestic inflationary pressures are building up in the euro area. wage increases remain contained, against the background of ongoing moderate economic growth and weak labour markets. in the context of what is a broadly favourable outlook for price developments over the medium term, upside risks to price stability need to be taken into account. given past oil price rises, there is a continued need to avoid second - round effects in wage and price - setting throughout the economy. responsibility on the part of social partners remains very important. moreover, developments in indirect taxes and administered prices require close monitoring. turning to the monetary analysis, the latest data confirm our previous assessment. monetary and credit growth strengthened in the second half of 2004, largely as a consequence of the prevailing low level of interest rates. given the strength of monetary dynamics over the past few years, there remains significantly more liquidity in the euro area than is required to finance non - inflationary growth. overall, the monetary analysis points to upside risks to price stability over the medium to longer term. at the same time, the combination of high excess liquidity and strong credit growth could in some countries become a source of unsustainable price increases in property markets. to sum up, the economic analysis suggests that underlying domestic inflationary pressures are contained but upside risks to price stability over the medium term need to be monitored closely. in this context, it is crucial that there is no spillover from current short - term developments in consumer price inflation to long - term inflation expectations. cross - checking with the monetary analysis supports the case for continued vigilance with regard to the materialisation of risks to price stability over the medium term. with regard to both fiscal policies and structural reforms, the governments and institutions of the european union will have to confront many important challenges in the course of 2005