##minants of productivity shows that lower productivity growth in the euro area has been partly related to higher employment due to greater participation of lower - skilled labour. sustained wage moderation and some progress in labour market reforms aimed at increasing labour market participation appear to have partially shifted production towards a more intensive use of labour. there are also indications that the slower pace of productivity growth observed in the euro area since the mid - 1990s reflects an insufficient use of new productivity - enhancing technologies. while productivity growth has increased in sectors that produce information and communication technologies or provide related services, it has declined in many other areas of the economy. this points to structural rigidities in the euro area that prevent or hinder the fast and effective dissemination of new technologies and improved production processes across the economy. against this background, structural reforms that stimulate innovation, investment and productivity, and promote the use of new productivity - enhancing technologies are crucial. stimulating product market competition, facilitating restructuring and improving human capital through adequate educational systems and “ on - the - job ” training are likely to speed up productivity gains from the use of new technologies. we are now at your disposal for questions.

m3 over the past few years, substantially more liquidity in the euro area exists than is needed to finance non - inflationary economic growth. this could pose risks to price stability over the medium term and warrants vigilance. the exceptionally low level of real interest rates is also further stimulating private sector demand for credit. growth in loans to non - financial corporations has continued to pick up in recent months. moreover, demand for loans for house purchase has continued to be robust, contributing to strong house price dynamics in some regions of the euro area. to sum up, the economic analysis confirms that underlying domestic inflationary pressures remain contained, while medium - term upside risks to price stability exist and will be monitored closely. cross - checking with the monetary analysis supports the case for continued vigilance with regard to the materialisation of risks to price stability over the medium term. turning to fiscal policies, the governing council notes that, while some progress with fiscal consolidation and the correction of excessive deficits is envisaged in euro area countries ’ updated stability programmes, further consolidation in a number of countries is needed. in particular, several countries do not plan to pursue an appropriately ambitious adjustment path and are not targeting close - to - balance or in - surplus budgetary positions by the end of the programme horizon. in addition, in some cases, fiscal targets are based on rather favourable growth assumptions and on insufficiently specified measures. with respect to the stability and growth pact, discussions now need to be brought to a convincing conclusion with an outcome that safeguards fiscal discipline. the credibility of the excessive deficit procedure needs to be fully preserved. this is not only fundamental for macroeconomic stability and cohesion in the euro area but also for confidence and growth prospects in all member states. in this regard, the governing council welcomes the decision by the ecofin council, based on a recommendation by the european commission, to move, for the first time, to the next procedural step in the excessive deficit procedure and to give notice, in accordance with treaty article 104 ( 9 ), to greece. the governing council also takes the view that the extension of the deadline, from 2005 to 2006, for correcting the excessive deficit pushes the room for interpretation of the rules and procedures to the limit. it is now indispensable for greece to take effective action to correct its severe fiscal imbalances. as regards structural developments, the euro area has seen relatively low trend productivity growth since the mid - 1990s. an analysis of the deter