jean - claude trichet : looking at eu and euro area enlargement from a central banker ’ s angle - the views of the ecb speech by mr jean - claude trichet, president of the european central bank, at the diplomatic institute, sofia, 27 february 2006. * * * ladies and gentlemen, i am very honoured to be able to speak here today before such a distinguished audience. i would like to thank our hosts for their kind invitation. i must say, i actually feel quite at home here at the diplomatic institute. i would like to share with you today my views as a central banker on an issue that has many dimensions, namely eu enlargement. of course i will focus my attention on the economic and, in particular, the monetary aspects of this process, and on the issue of euro area enlargement. permettez - moi, mesdames et messieurs, de commencer mon intervention par quelques mots en francais. en effet, la bulgarie est membre a part entiere du mouvement de la francophonie ; a cet egard, dans moins de trois mois, la banque nationale bulgare accueillera la treizieme reunion des gouverneurs des banques centrales des pays francophones. j ’ ai toujours pris part a ces reunions avec le plus vif interet ; cette annee aussi, j ’ aurai le plaisir de revenir a sofia a la mi - mai comme invite du gouverneur iskrov pour une reunion consacree a la stabilite financiere. avant de presenter la structure de mon discours, permettez moi d ’ abord de faire une remarque d ’ ordre general. je crois que l ’ on est pas toujours sensible au fait que l ’ elargissement n ’ est pas un present offert aux nouveaux etats membres ; en effet, pour ceux qui souhaitent adherer, l ’ elargissement occasionne a la fois un travail assidu et aussi parfois des choix difficiles. je ne veux pas dire par la qu ’ il faudrait qu ’ il en soit autrement. prene

will remain one of their most important economic developments in the coming years. although remarkable progress has been made in the past in terms of catching - up, most of the countries display gdp per capita and price levels which are still considerably below those of the euro area. in 2004, the average gdp per capita level, as expressed in purchasing power standards, was roughly half of that of the euro area. catching - up in income levels is partially accompanied by a certain element of rise in price levels. thus, the process of real convergence can be expected to continue to play a role in the inflationary developments in these countries. to limit the inflationary impact of real convergence, it is therefore crucial that policy - makers continue to pursue a policy directed towards macroeconomic stabilisation to avoid excessive domestic demand and the resulting price pressures in the countries concerned. moreover, it underlines the need for structural reforms to limit nominal price and wage rigidities and to allow for improved supply - side conditions. this brings me to the third issue that i wish to discuss briefly, namely the need to foster fiscal consolidation and achieve sound fiscal positions. although the fiscal situation varies across countries, fiscal deficits are on average high or even very high in a number of new member states. as i mentioned before, bulgaria stands out as an example to the contrary. it is clear that fiscal consolidation is a major challenge for most of the new member states. their governments are confronted with competing expenditure demands, including inter alia public investment in infrastructure and the need to strengthen the effectiveness of public administration and the judicial systems. at the same time, in some of the new member states, the fiscal deficits are largely of a structural nature, reflecting rather generous social benefits. high lasting fiscal deficits can be expected to be impediments to economic growth and to bear risks to the sustainability of the government debt levels in some countries. consequently, policy - makers have to design and implement a credible consolidation path based on durable and growth - enhancing structural reforms in the public sector. conclusion let me conclude, first with a few words in french. la bulgarie a fait des progres notables dans la poursuite d ’ une politique macro - economique de stabilite. avec la caisse d ’ emission ( currency board ) vous vous etes engages dans une voie qui requiert parfois des choix difficiles. grace a la coherence de vo