20 april – to make full use of the current economic growth and better than expected tax revenues to pursue sound fiscal policies and to avoid procyclical policies in line with the provisions of the stability and growth pact. in the view of the governing council, this requires a rigorous implementation of 2007 budgets, the avoidance of expenditure overruns and the full allocation of unexpected extra revenues to deficit and debt reduction. for 2008, countries with remaining fiscal imbalances are expected to pursue more ambitious than planned budgetary targets. as a result, all euro area countries should achieve their medium - term objective of sound budgetary positions as soon as possible and by 2010 at the latest. moreover, all countries should avoid fiscal policies that feed macroeconomic imbalances. this would allow euro area countries to prepare themselves for less favourable economic conditions. as repeatedly stressed, the governing council fully supports structural reforms that enhance competition, increase productivity and foster economic flexibility, thus promoting the potential for real gdp growth and employment. increased productivity also allows for increases in real wages without negatively impacting on employment, thereby supporting the income growth of the euro area work force. in recent years, average wage increases in the euro area as a whole have been rather moderate, making a vital contribution to job creation and lower unemployment. it is important that this favourable trend in labour markets continues, so contributing to a prolonged and robust upswing. in this respect, sufficient wage differentiation is required so as to improve employment opportunities for less skilled workers and in sectors and regions with high unemployment. furthermore, the removal of impediments to labour mobility would help to address local imbalances in labour markets and to enhance the adjustment flexibility of euro area economies to economic shocks. the euro area could reap major benefits from these policies in terms of economic dynamism, more job creation, lower unemployment and increased per capita income. we are now at your disposal for questions.

gains in business efficiency. consumption should also strengthen further over time, in line with developments in real disposable income, increasingly supported by employment growth and improving labour market conditions. the risks surrounding this favourable outlook for economic growth are broadly balanced over the shorter term. at longer horizons, the balance of risks remains on the downside, stemming mainly from external factors. such factors include fears of a rise in protectionist pressures, the possibility of further increases in oil prices and concerns about possible disorderly developments due to global imbalances. with regard to price developments, according to eurostat ’ s flash estimate, annual hicp inflation was 1. 8 % in april 2007, after 1. 9 % in march. looking at the coming months, barring further increases in oil prices, significant base effects deriving from last year ’ s energy price volatility will strongly influence the profile of annual inflation rates. on the basis of the current level of oil prices and oil price futures, annual inflation rates are likely to fall somewhat in the months to come, before rising again towards the end of the year to hover at levels around 2 %. over the policy - relevant medium - term horizon, the outlook for price developments remains subject to upside risks. these relate notably to the increasing capacity utilisation in the euro area economy, the possibility of further oil price rises and additional increases in administered prices and indirect taxes beyond those announced and decided thus far. more fundamentally, stronger than currently expected wage developments could pose significant upward risks to price stability, not least in view of the favourable momentum in labour markets observed over the past few quarters. the governing council is monitoring wage negotiations in the euro area countries with particular attention. it is crucial that the social partners meet their responsibilities so as to continue to avoid wage developments that would eventually lead to inflationary pressures and harm the purchasing power of all euro area citizens. in this context, it is also important to point out that wage agreements should be sufficiently differentiated and take into account price competitiveness positions, the still high level of unemployment in many economies and productivity developments across sectors. the monetary analysis confirms the prevailing upside risks to price stability at medium to longer horizons. the underlying rate of monetary expansion remains strong, in a context of already ample liquidity. the ongoing strength of monetary expansion is reflected in the increasingly rapid growth of m3, which in march reached an annual rate of 10. 9 %, as well as in the ongoing high levels of credit growth. monetary and credit