out of the single currency. and, already, most of them have unilaterally announced target dates for joining the euro area. in order to do so, they must fulfil the relevant requirements laid down in the maastricht treaty. this means that they must achieve a high degree of sustainable nominal convergence, which will be assessed on the basis of the same criteria that were met by the current members of the euro area. one of these criteria is exchange rate stability, which requires participation of the currency in the exchange rate mechanism ( erm ii ) without severe tensions for at least two years. these requirements for euro adoption must be fulfilled not only because the principle of equal treatment should be respected. they must be fulfilled for substantive reasons too : that is, in order to ensure the smooth entry and successful participation of a country in the european monetary union. we should not forget that a member state ’ s decision to adopt the euro is irreversible. it is not possible to identify a unique path towards euro adoption for the new member states, or to recommend one particular, single strategy as the most appropriate one for achieving this goal. it is also difficult to predict the exact time when prospective participants will join the euro area - although the target dates announced by most of them range from 2007 to 2010. there are several reasons for these conclusions. at present, the economic situations of the new member states differ considerably, notably with regard to the degree of nominal and real convergence they have achieved. moreover, these countries are characterised by different economic structures and they employ a variety of monetary policy strategies. overall, and on average, the progress made towards convergence by the acceding countries is considerable, but it is not uniform in all areas, and there are also significant divergences across countries. consequently, the economic situations and policy strategies of the new member states will be assessed on a case - by - case basis as they proceed towards euro adoption. despite the progress already made towards macroeconomic stability by the acceding countries overall, achieving the necessary degree of nominal convergence for joining the euro area will require the effective tackling of several policy challenges in a number of countries. their commitment and determination to adopt the euro sooner rather than later has oriented their macroeconomic policies towards stability. greater and more systematic efforts are, however, necessary to reduce fiscal deficits, which on average were 5. 3 % of gdp in 2003, well above the reference value of 3 %, and in some countries substantially higher.

leisure, while americans use them to generate more income. in my view, this argument can only provide a partial explanation. in fact, lower participation rates and shorter working hours in europe can be ascribed, to a considerable extent, to rigid labour market institutions and the disincentives set by tax and social security systems, which influence the preferences of individuals regarding employment and leisure. with more flexible labour markets, fewer restrictions and lower taxes on labour, many people would decide to work more than at present. a higher labour force participation rate is - in the absence of population growth comparable to that of the united states - the main lever with which we can also address the mounting problems related to the ageing of the european population. although some eu countries already have employment rates comparable to the united states, and some others can match the united states in terms of productivity, no single european country manages to do both. by stepping up the pace of structural reform in labour markets, european countries can increase productivity and labour force participation, and thereby raise potential growth substantially. structural reforms in labour and product markets in order to make the economy more flexible and productive also yield other benefits, some of which are “ closer to home ” for me as a central banker. in an economic environment characterised by greater market flexibility, the single monetary policy can maintain price stability and help support economic growth much more effectively. by increasing the speed with which labour and product markets respond to shocks and policies and by raising the longterm rate of sustainable growth, structural reforms to boost productivity and flexibility in the euro area economy enhance the effectiveness of monetary policy to preserve price stability under monetary and financial conditions fostering faster growth. the united states provides a “ living example ” in this respect : strong productivity growth in the past few years has contributed to raising potential output and alleviating the risk of monetary accommodation during a period of economic recovery leading to the build - up of inflationary pressures. it should be clear from what i have said that, over the long term, the key to addressing the problem of europe ’ s less - than - satisfactory growth performance lies with national governments, trade unions and employers, and not with the ecb. monetary policy cannot be expected to increase economic growth sustainably by tolerating higher inflation. what it can do is to promote long - term growth by maintaining an environment of price stability - and this is precisely what the ecb is committed to doing. at the present juncture, with the euro area economy operating below capacity