they also have to be maintained after that time. both aspects are important if monetary union is to function smoothly. a high degree of convergence the convergence criteria make considerable demands on the accession countries in terms of macroeconomic stability. the inflation criterion requires a high degree of price stability backed by market economic conditions. this is necessary to avoid longer and more persistent delays to the competitiveness within emu and to allow the development to be as tension - free as possible within the framework of a single monetary policy. stable prices create an atmosphere of accountability, increase transparency and allow resources to be allocated efficiently. they are thus a vital precondition for growth and employment. most candidates have made distinct progress in recent years in terms of macroeconomic stability. however, counter - developments, especially in prices, have been observed recently ; in addition to internal influences, such as wage developments, these have been the result of external factors – such as oil prices and the exchange rate of the euro. 9 great efforts are still needed to take the double - digit see imf ( 2000 ), “ exchange rate regimes in transition countries ”, washington. rates of inflation in romania, slovakia, bulgaria and poland back to an acceptable level. in 2000 only lithuania and malta had a rate of inflation which would have been in line with the inflation criterion. if inflation expectations are to be kept as low as possible and the appropriate underlying conditions for a stability - oriented monetary policy secured, deficit and debt ratios need to be low. sound public finances also ensure that national fiscal policy remains flexible even in times of cyclical downturns. this room for manoeuvre becomes even more important for the participants in a monetary union since they no longer have recourse to the instrument of exchange rate adjustments. with regard to the criteria on the sustainability of public finances, the countries made improvements by and large up to last year. on average, in 2000 the accession candidates virtually attained the benchmark of 3 % established by the maastricht convergence criterion. malta and the czech republic, in particular, still have very high public deficits. especially against the background of an economic slowdown, however, some candidate countries are likely to experience a marked deterioration of their budgetary position in 2001. moreover, it must be borne in mind that the deficits are based on definitions that are not always fully consistent with those of the eu. government debt in all the countries – with the exception of bulgaria – is around 60 % or less. the interest rate criterion

ailing countries. that ’ s why it ’ s all the more important that expectations are met and that further reforms are not just announced but actually put into practice. 4. germany as a role model germany is an important role model in this respect. what germany has accomplished offers a vivid demonstration for its partner countries in the euro area that structural reforms pay off. at the same time, i would like germany ’ s current economic and social policy to set more of an example. i ’ m thinking particularly of the option allowing individuals who have paid into the pension insurance system for a long period of time to draw a full pension at the age of 63. after all, the decision made just a few years ago to progressively raise the standard retirement age to 67 served as a model for countries in which the pension systems were likewise feeling the strain of an ageing population. logically, raising the retirement age was part of the agreed stabilisation programme in three of the four programme countries. so the signalling effect of retirement at 67 was blurred to a certain degree, and pension policy seems akin to the famous dancing procession of echternach – two steps forward, one step back. “ retirement at 63 ” offers a financial incentive to take early retirement – there is a financial upside of up to €40, 000 for an average wage or salary earner, while higher earners reap even greater benefits. “ retirement at 63 ” is something which favours age groups that are currently close to retirement and punishes younger generations. that reminds me of groucho marx, who once said : “ why should i care about posterity? what ’ s posterity ever done for me? ”. it ’ s true that the increase in pension payments will not directly raise contribution rates on account of the high level of reserves. but from a medium - term perspective, it will drive up non - wage labour costs as well. another outcome of “ retirement at 63 ” is that workers that are still needed in the labour market will cease to be available. according to our calculations, “ retirement at 63 ” will diminish the labour force potential by around 165, 000 people by 2016. germany does not have enough workers going forward. in 2020, the number of workers available to the labour market will probably have shrunk by 1½ million compared with today ’ s figures. in 2020, this demographic effect will have depressed economic output by nearly €70 billion. if germany is going to address this problem, it