in the treaty. if all policy areas concerned respect the aforementioned allocation of objectives and responsibilities and act accordingly, they will already be making the best possible contribution to the community objectives. 3. a sound institutional arrangement a clear allocation of responsibilities is essential for well - designed policy - making, especially in a complex institutional set - up as the one governing monetary union in europe. at the same time, a continuous dialogue between different policy actors on the basis of the allocation of tasks is also important for effective governance. an open exchange of views and information between individual policy actors - without any commitment or mandate to take and implement joint decisions - will strengthen economic governance if it manages to improve the common understanding of the objectives and responsibilities of the respective policy areas and does not dilute accountability. the central legal basis for economic policy co - ordination among member states within monetary union is specified in article 99 ( ex 103 ) of the maastricht treaty, which states that “ member states shall regard their economic policies as a matter of common concern and shall co - ordinate them within the council. ” on the basis of this principle, the framework for the definition of economic policy priorities is provided by the “ broad economic policy guidelines ” adopted by the council each year. these channels for policy co - ordination among member states do not involve the independent monetary policy of the ecb. any form of exchange of views and information, however, should clearly be distinguished from an attempt to co - ordinate macro - economic policies ex ante, which would give rise to serious information, incentive and enforcement problems. ex ante co - ordination among different policy actors would blur the fundamental responsibilities of the respective policy areas under the treaty. this, in turn would reduce accountability of individual policy actors and ultimately increase uncertainty about the policy framework. given the eurosystem ’ s monetary policy strategy, there should be no ambiguity how the single monetary policy will respond to developments in fiscal policies and wage settlements to the extent that they will affect the maintenance of price stability. as a result, national governments and wage setters alike should be able to design and implement the policies under their responsibility in a manner that allows for the interdependencies of these policies with the single monetary policy. obviously, if they take the single monetary policy ’ s credible commitment to maintain price stability as given, this will help to align expectations and condition their behaviour in a favourable way. national governments and wage setters, in turn, are reassured that monetary policy will respond

actors. the delegation of the single monetary policy to an independent central bank enhances credibility, increases transparency and also facilitates accountability. similarly, the stability and growth pact provides a basic set of rules for the conduct of sound and disciplined fiscal policies by national governments, while in principle preserving sufficient room for manoeuvre for the operation of automatic stabilisers without infringing the 3 % ceiling for the deficit - to - gdp ratio. of course, safeguarding the soundness and discipline of fiscal policies that largely remain the competence of national governments presents a particular challenge. ultimately, it must be ensured that twelve national budgets taken together are consistent with sustained stability for the euro area as a whole. in this regard the stability and growth pact provides for a clear allocation of responsibilities between the commission and the ecofin council. the commission is responsible for compiling the necessary information and analysis for effective multilateral surveillance, for formulating recommendations for decisions by the council, and for overseeing the correct application of the pact. the council is responsible for taking the final decisions and it thus has the ultimate responsibility for enforcing the pact. these two principles of surveillance and enforcement form the basic idea of the stability and growth pact and must not be put into question. having said that and in the light of the ongoing discussions on the future of the eu fiscal framework, let me re - affirm the ecb ’ s view that the stability and growth pact is appropriate in its present form, but that there is scope for improving its implementation. specifically, given that the experience with the pact since 1999 has been mixed at best, there is a need to provide enhanced incentives to comply with the commitments under the pact and to increase peer pressure towards enforcing the rules. at the same time, there is a need for increasing the awareness of the basic principles underlying the surveillance and enforcement process. ultimately, this requires striking a delicate balance between the sovereignty of national governments, the responsibility of the ecofin council for enforcing the pact and the independence of the commission, the latter being essential for an effective assessment of national budgetary positions. the ecb has always considered the fiscal rules enshrined in the treaty and the stability and growth pact as an essential element of monetary union. these rules already contain significant scope for flexibility. while the implementation of the preventive arm of the pact could no doubt be strengthened, in particular to enhance incentives for compliance in good times, we reject proposals that would undermine the pact ’ s corrective arm and the excessive deficit procedure contained