the beginning of the 1990s, the dispersion in inflation rates across the euro area countries was, on average, around 6 percentage points ( standard deviation measured in unweighted terms ). last year, the inflation dispersion was only 0. 7 percentage point. as to real gdp growth rates across the euro area countries, the dispersion, measured in terms of standard deviations, has been fluctuating around a level of 2 percentage points over the past few decades, with no apparent upward or downward trend. while some differences are temporary, others are of a more persistent nature. let me stress that the sustained differences in economic growth or inflation rates between some euro area countries are absolutely normal in a monetary union, to the extent that they are related to catching - up phenomena. however, it is also true that persistent differentials which reflect structural rigidities are a concern. i will address this issue later. in sum, there is evidence of stronger economic integration among the countries in the european union. the adoption of the euro has particularly contributed to this development by reducing information costs, enhancing price transparency and eliminating exchange rate risk between countries in the euro area. in this manner, the euro acted as a catalyst for the single market, within which goods, services, people and capital are to move freely. nonetheless, a lot remains to be done, for instance, in order to increase services trade and labour mobility and to reduce structural rigidities. 3. economic integration and adjustment processes in the euro area let me now turn to adjustment processes whose smooth functioning is important in all eu countries but particularly in the euro area. why is an efficient adjustment mechanism particularly important in the euro area? in a monetary union where national monetary and london economics, “ quantification of the macroeconomic impact of integration of eu financial markets ”, report to the european commission, 2002. exchange rate policies are no longer available options, it is important to make sure that other mechanisms of adjustment to shocks function properly. this is needed to avoid a situation whereby a country or a region, for instance after experiencing a specific event or asymmetric shock, enters either into a period of protracted low growth and higher unemployment, or into a long period of overheating. there are many factors that can improve the resilience of the euro area economies to adverse shocks. but before addressing this issue, let me stress that the ecb ’ s single monetary policy contributes to the proper functioning of adjustment mechanisms within the euro area by

numerous channels have been identified in economic theory through which globalisation can influence the level of prices. without doubt, globalisation and the associated rise in world trade have contributed to import price moderation, 5 notably in the manufacturing sector, which is primarily due to increased imports from low - cost countries. furthermore, the widespread opening - up of emerging countries and of almost all former centrally planned economies has significantly increased the labour pool available, leading to dampening pressures on labour costs, especially for unskilled labour. globalisation can also exert pressure conducive to lower inflation more indirectly, as increasing international competition may have limited the pricing power of domestic corporations. however, at the same time, the sudden emergence of fast - growing economies in the global economy is exerting upward pressure on prices for energy and raw material prices. 6 regardless of the intensive research currently pursued in particular in academia, at central banks and at various international institutions, there still remains significant uncertainty about the aggregate role and impact of globalisation. even though the net effect of these counterbalancing forces is mostly believed to have contributed towards reducing inflation, whether and how long this disinflationary effect will last in the future remains an open question. ultimately, globalisation is an opportunity, not a threat. globalisation provides much - needed solutions. for instance, it may allow increased labour inflows to the euro area, which, in certain sectors, would help to reduce bottlenecks in labour markets and hence ease wage pressures. in addition, globalisation may supply external capital in exchange of know - how. as a matter of fact, the euro area has become an attractive place for foreign direct investment ( fdi ). a breakdown of extra - euro area liabilities indeed reveals that inward fdi amounts to more than 27 % of euro area gdp, against 22. 5 % for the united states. the euro area has received, proportionally to gdp, a similar amount of fdi as china, 27. 3 % for both economies, according to imf statistics. a rising amount of fdi comes from the so - called bric group – including brazil, russia, india and china. in fact, contrary to what such protectionist thinking would suggest, eu integration and the adoption of the euro seem to make europe fitter for globalisation. the single currency has supported the development and diversification of exports in the euro area countries, as mentioned earlier. the euro has also made a significant contribution to