are policies supporting the creation of new businesses and housing policies that do not hinder labour mobility, e. g. through rent subsidies or high transaction costs. in most countries, there has been some progress with labour market reform over the past decade, leading to a small reduction in structural unemployment. nevertheless, labour market flexibility needs to be enhanced further, especially in view of the large number of people who are wastefully underemployed or unemployed in europe, resulting in individual difficulties and welfare losses to society. in the goods and services markets, further steps in reforming and liberalising markets would improve the efficiency of price signals, resulting in reduced inflation persistence and a speedier adjustment mechanism to shocks. services markets in the euro area hold a particularly great potential to benefit from greater cross - border competition, especially as this sector is likely to have a sizeable impact on employment given its high labour content. that is why the eurosystem strongly supports the lisbon process and shares the views expressed by the former dutch prime minister wim kok in his recent mid - term assessment of the lisbon agenda. concluding remarks let me now briefly say a few words in conclusion, • in terms of macroeconomic stability, the euro area and the new enlarged eu are committed to a stability - oriented framework that provides the best conditions for sustainable economic growth and employment. the results of the euro area in terms of nominal and real convergence are impressive and compares well to the criteria for an optimum currency area. the euro has played an important role in these achievements and will continue to do so. • in terms of what may lie ahead, a process of change has been set in motion. the internal market and the single currency, combined with structural changes in the world economy, are changing economic conditions at a rapid pace. ultimately, this may lead to a higher degree of economic diversity and regional specialisation, which, provided that it is led by market forces, should enhance the economic welfare of the area as a whole. issues related to the redistribution between more advanced and lagging regions may pose a challenge for regional policies at national and eu level. • automatic fiscal stabilisers can contribute to economic stability via their smoothing impact on aggregate demand. given the lack of a cross - border central fiscal transfer mechanism, it is vital that these stabilisers are able to operate freely. this calls for renewed efforts to return to sound fiscal positions, as those we saw in the run - up to monetary union. • in terms of structural policies,

have arisen, and to cooperate with the legal authorities. we have also sought to respond honestly to questions from this committee. i have previously given evidence to the committee on the sequence of events as we saw them unfold. it is worthwhile to try to draw that together. in so doing, it is important to keep clear the distinction between the two companies in that sequence. in 2006, following the events at the australian wheat board, the reserve bank board asked questions about the policies for the use of overseas agents by the two companies. in the case of npa, the bank ’ s questions prompted the company to begin a process of developing stronger policies. rba management asked for an update on progress at npa in early 2007, and the npa board appropriately sought a paper from management on dealings with sales agents. after considering that paper, the npa board decided that an audit should be undertaken of past practices and compliance. that audit raised several very concerning things. it recommended that, apart from discontinuing the use of agents, the npa board undertake an urgent investigation of the role of relevant management and staff in dealing with agents to ensure compliance with australian law. on receiving this report, the npa board took the decision to cease the use of agents, and through a board sub - committee commissioned freehills to provide an assessment of the standards and compliance questions. it was while all these processes were under way that concerns held by a member of npa ’ s management over the company ’ s conduct became known to a reserve bank assistant governor who sat on npa ’ s board. the npa manager was asked by the then deputy governor to make a written statement. this document was part of the material examined by the freehills team that was asked by the npa board to examine the matters. i have conveyed these facts to the committee over the course of questioning at previous hearings. the document provided by the manager at npa was held in strict confidence at his request. this was a condition required by him, and the bank agreed to it because it valued his willingness to come forward. seeking professional legal expertise to assess the matters contained in this document, and the concerns raised in the audit, was a mark of how seriously they were taken. the decision to seek an external legal review was an important one. in the bank ’ s view, it was imperative to establish a process to investigate the issues thrown up by the audit findings and to ascertain and evaluate the