was taking insurance against more negative developments which, although not the most likely to occur, were nevertheless possible. the other example refers to the cut in rates decided in may 2001 when headline inflation was above 3 per cent but the world economy seemed to be on the brink of recession and there were no risks for medium term inflation. this flexible approach was appropriate in both cases and was validated by subsequent events. monetary policy cannot be transformed into a dogmatic and mechanical science and it will always be necessary to use good judgement to properly assess the balance of the risks regarding inflation prospects. the same assessment of risks that is also essential to good communication with markets which has become such a crucial part of the activity of central banks. the recent clarification of our monetary strategy, in particular concerning the goal of price stability now defined as implying an inflation rate « below but close to two per cent », was thus important to improve communication and to ensure the continuation of good monetary policy for the euro area. turning now to our own national perspective, it is clear that portugal has been a net beneficiary as a participant in the european economic and monetary union. among other things, we have taken advantage of our trade interdependence with europe through currency stability ; we imported a low inflation regime that is good for long - term growth and we have benefited from financial integration that granted us lower bond rates and a lower cost of capital. there are obviously risks involved and the need to adopt new and rigorous discipline concerning public finance and flexibility of markets in order to achieve timely adjustment of wages and prices. in view of a past history of high inflation, portugal could be considered a good candidate to illustrate what some critics underline as the great difficulty of a single monetary policy in dealing with a group of heterogeneous economies. in our case, however, the performance of the economy throughout this period does not confirm these possible causes of concern. since 1999 portugal has had an average positive inflation differential with the euro area of only 1. 2 per cent and an average annual output growth of 0. 5 per cent higher than the one of our partners. considering the overall picture, the dispersion of inflation in the euro area, after only four years, is remarkably similar to the one verified in much older monetary unions like the usa or canada. what some critics seem to forget is that monetary union itself contributes to the deepening of economic and financial integration, by promoting the medium term convergence of inflation and the synchroni

de portugal ’ s participation in the european system of central banks ( escb ) and the legal committee ( known as legco ), which has played a crucial role in developing the emu. on 7 july 1998, the ecb approved the rules of procedure, which laid down the establishment of escb committees – composed of representatives of the ecb and of the national central bank of each participating member state – to assist in the work of the escb. the legal committee is one such committee. the committees established under this regulation assist in the work of the decision - making bodies of the ecb, specifically the executive board and the governing council and are composed of representatives of each of the national central banks and the ecb. different committees have different compositions, depending on whether matters fall within the field of competence of the eurosystem, the escb or – since 2014 – the single supervisory mechanism. 1 / 4 bis central bankers'speeches the establishment of these committees was the expression of a true conceptual system that was behind the preparatory work conducted on the monetary pillar during stage three of emu. this committee structure – different from the technical committee procedure present in other european decision - making bodies – invokes the idea of a participatory decision - making process which benefits from the sharing of experience and know - how among national central banks, under the aegis of the ecb. the ecb ’ s legal committee is a genuine example of the identity of the eurosystem and the escb. taking over from the working group of legal experts, which operated under the emi, legco is a committee with privileged insight due to its cross - cutting nature, whose assistance is invariably requested by all other eurosystem committees, the executive board and the governing council of the ecb. this is also the reason why, 20 years after its creation, it is no exaggeration to say that this committee acts as a repository that is a vital tool to understand and interpret developments in the eurosystem and the escb, and will certainly be called upon during the implementation of potential reforms. 2. regardless of one ’ s opinion on the merits of the european monetary union, the creation of the ecb was a major historical landmark – which had a significant effect on europe and each of its countries and a profound impact on international monetary relations and consequently on the economy and international politics. several generations of banco de portugal employees have participated in the construction of emu at different times : first,