shown that the ecb is among the most predictable central banks in the world. in the interests of transparency, we regularly explain our policy framework and actions to the people of europe, their elected representatives – namely the european parliament – professionals in the financial markets and the media. indeed, the ecb was the first major central bank to introduce a public display of its diagnosis and overall assessment immediately after the meetings of the governing council via a regular monthly press conference immediately after the announcement of its monetary policy decisions. credibility is the third principle that i would like to emphasise as underlying the success of the single monetary policy. a high degree of credibility is essential to the ability of a central bank to guide expectations about future inflation and interest rates. in a market - based economy, the central bank can directly influence short - term interest rates through its monetary policy instruments. consumption and investment decisions, and thus medium - term price developments, are also to a large extent influenced by longer - term interest rates, which depend largely on private expectations regarding future central bank decisions and future inflation. it is important that developments in longer - term rates support the objective of maintaining price stability over the medium term. how do these three elements come together to contribute to the successful conduct of monetary policy for the euro area? let me illustrate by using an example from our recent experience. over the past few years, the euro area has witnessed a gradual recovery in economic activity that has now led to real gdp growth rates that are close to our present estimates of the potential growth rate of the euro area economy. however, over the same time period headline annual hicp inflation in the euro area has remained at rates just above 2 %, mainly as a result of the strong increases in energy prices. indeed, oil prices have surged from around usd 30 per barrel at the beginning of 2004 to an average of usd 71 per barrel in april 2006. in the past, prior to the single monetary policy, such large increases in energy prices led to substantial lasting rises in headline inflation stemming largely from second - round effects in wage and price - setting behaviour, which have their origin in a dis - anchoring of inflation expectations. in the most recent period, such second - round effects have not emerged. indeed, one of the successes of the single monetary policy in the recent past has been the effective anchoring of inflation expectations at levels consistent with price stability, despite the surge in oil prices and a number of other inflationary shocks. all available measures of long - term

as regards structural reforms, it is essential, for europe ’ s future, to ensure that it has a fully operational internal market, allowing a free flow of labour and capital and free trade in goods and services. removing the remaining barriers within the eu will be a powerful means to promote the efficient allocation of factors of production as well as deeper economic and financial integration. this in turn would allow the eu to realise its substantial potential for stronger output and employment growth and to increase its resilience to shocks. exploiting the opportunities of the single market will help to safeguard the prosperity of the citizens of europe. for those member states which have fulfilled the convergence criteria laid down by the treaty and participate in the euro area, the considerable benefits of the internal market are further enhanced by the single currency, which offers them a credible framework for monetary policy and price stability in an environment characterised by the absence of exchange rate uncertainty within the euro area, low long - term interest rates, price and cost transparency, reduced transaction and information costs and stronger insurance against economic and financial instability. in this respect, the further enlargement of the euro area on 1 january 2007 with the entry of slovenia will be a new historical landmark. in order to fully reap the advantages of the euro and to allow adjustment mechanisms to operate efficiently within the enlarged currency area, it will be necessary to fully integrate slovenia into economic and monetary union, which calls for all remaining barriers to be removed, including those related to labour mobility. indeed, open, competitive and flexible markets are of particular importance for the functioning of the euro area economy and the smooth conduct of the single monetary policy. for its part, the governing council has undertaken all the necessary preparations to make banka slovenije an integral part of the eurosystem. we are now at your disposal for questions.