stability in the euro area, this threat will be assessed. however, all other factors that impart information on price developments will always be taken into account before a decision will be taken. obviously, if a strong and abrupt appreciation of the euro were to occur, this would lead, all other things being equal, to downward pressures on price developments. in such a situation, there would be more reason to lower the ecb ’ s interest rates, which might then, in turn, help counteract part of the prior exchange rate movement. but setting exchange rate targets might, for example, imply that a central bank has to increase its interest rates in a situation of weak demand and downward pressures on prices, just because of a depreciation in the exchange rate. i think you will agree with me that this might not be appropriate. according to the maastricht treaty, the ecofin council may formulate so - called general orientations for the exchange rate policy, which shall be without prejudice to the primary objective of maintaining price stability. the ecofin council has agreed to issue so - called orientations for exchange rate policy only in exceptional circumstances, such as a clear and sustained misalignment of the euro. in addition, we are not currently participating in a formal exchange rate arrangement with third countries outside the eu, for instance the united states, and we consider it very unlikely that this situation will change. accountability and transparency of the monetary policy of the eurosystem let me turn to the issues of accountability and transparency. in general, central banks should be open, transparent and accountable, reporting extensively to the public on their activities. the issue of the transparency of monetary policy is very important, given that the eurosystem is a new institution and the public is not accustomed to evaluating its behaviour. moreover, by communicating clearly with the public, the eurosystem reinforces its credibility and signals that its monetary policy is appropriately geared to the maintenance of price stability. in this regard, the eurosystem ’ s approach bears comparison with the ‘ best practices ’ of any other central bank. accountability is the counterpart to independence. we should also be clear that the independence of the ecb does not exclude a dialogue with political authorities. the monetary policy of the eurosystem will be held accountable for reaching its overriding objective of maintaining price stability. the eurosystem is open, transparent and, above all, accountable for its performance. as part of its communication strategy, the governing council of the

appear to be in the interest of higher employment. unemployment in the euro area is largely structural in origin. implementing a monetary policy stance which is more lax than is justified by the monetary, financial and economic conditions will not solve this problem. instead it will exacerbate it over the medium term, as inflation distorts investment and savings decisions, raises the risk premium in long - term interest rates and undermines the allocative efficiency of the price mechanism. only effective structural policies that improve the flexibility and efficiency of labour and goods markets can reduce unemployment in a successful and lasting manner. i appreciate that such reforms are not always easy, not least because the benefits which they yield occur mainly in the medium to long term. however, they are essential. in those euro area member states that have taken up the challenge of structural reform, unemployment has fallen significantly. other euro area member states are called upon to follow these examples : structural reform throughout the euro area is fundamental to the success of monetary union and to improving europe ’ s economic performance. in this respect, we may also be able to learn something by looking at the reasons behind strong employment growth and low unemployment in some of the member states of the european union and in the united states, in particular regarding the flexibility of labour markets and incentives to create and accept new jobs. monetary policy decisions and the outlook for price stability since the start of this year the governing council has taken the following main monetary policy decisions. in december 1998 the governing council of the ecb announced that the level of interest on the main refinancing operation would be 3 %. since then, the governing council has kept this rate unchanged, as it has judged that doing so was serving best the maintenance of price stability. the 12 - month growth rate of the broad monetary aggregate m3 increased to 5. 7 % in january 1999 from 4. 5 % in december 1998. this increase is mainly due to rapidly growing overnight deposits, which account for around one - third of m3. the three - month moving average of m3 ( for the period from november 1998 to january 1999 ) increased to 4. 9 %, that is, slightly above the announced reference value of 4½ % per annum. in view of the uncertainty relating to special factors pertaining to the changeover to the stage three environment and the introduction of the euro, the governing council does not view the recent acceleration in m3 as a signal of future inflationary pressures. however, monetary developments need to be monitored closely in the coming