significant improvement in european budgetary discipline has indeed been attained in the course of time. it might in this respect also be illustrative to look at the united states, which experienced a downward swing in their federal budget deficit of 6. 5 percentage points between 2000 and 2003, although this was partly due to special factors, such as the war in iraq. how can we solve these problems, or in any case make sure that they do not arise again in the future? in 1992, the eu treaty that laid down the path towards economic and monetary union was signed in the dutch city of maastricht. although it was clear that a potential conflict exists between a single monetary policy and decentralised fiscal policies, it was also clear at that time that establishing a political union, or in other words an independent european fiscal authority, to supplement the monetary union was a bridge too far. instead, a rather artificial solution in the form of the stability pact was created. however, the experiences with implementing the pact over the last few years have made it very clear that governments are reluctant to accept constraints on national sovereignty through limitations on budgetary policy. this holds especially true in times of subdued economic growth. discussions about fundamentally improving the adherence to the european budgetary rules are in my view therefore inextricably linked to discussions about curtailing national budgetary sovereignty, and as such to forming a political union. although i realize that this obviously will be a realistic solution only in the long term, we should not hesitate to bring this under discussion. to a certain extent, the discussion on the appropriate role of national budgetary sovereignty has already started. recently the european commission decided to challenge the decision by the council of european finance ministers in november to deviate from the stability pact, by bringing legal action before the european court of justice. the reason for this decision is not to challenge the substance of the decision, as in fact there is no major difference between the budgetary consolidation path under the proposals by the european commission and under the eventual recommendations by the european council. rather, the aim is to seek legal clarity regarding the fundamental question that emerged from the council decision in november, that is whether the european budgetary framework ultimately is of a supranational or of an intergovernmental character. of course, a fundamental discussion like this should not distract us from the search to find solutions to improve the enforcement of the european budgetary rules in the shorter term. a contribution towards such a solution is to deny

end of my speech. for the future, i am optimistic. we have passed the turning point in the cycle. for this year, i expect growth to be 0. 7 %, rising further to 2 % in 2005. an important driving force is the global recovery, which will stimulate our exports, even though we have to regain competitiveness. nevertheless, the strength and sustainability of this recovery will to a large extent depend on the persistence and speed at which the reforms that have already been set in motion are pushed through. in particular, next to the substantial budgetary consolidation efforts, the continuation of wage moderation to foster price competitiveness is essential. the tripartite agreement that was reached last autumn to freeze nominal wage rises in the next two years is a positive development in this respect, as it clearly shows that the importance of wage moderation is now in the minds of both employers and employees. turning to the economy of the eurozone, it is clear that the slowdown has been less steep but more prolonged than in the us. in the us, economic growth deteriorated with 3. 5 percentage points from 2000 to a virtual standstill in 2001, after which it quickly regained speed with a growth rate of 2. 5 % in 2002. in the eurozone, the slowdown was much more gradual, with a fall in economic growth of 3 percentage points over a period of three years, from 2000 to 2003. this pattern of the slowdown - a gradual deceleration of growth, rather than a sharp fall in output - may have meant that the immediate pressure on corporations to adjust their balance sheets and labour force was less intense, delaying the adjustment process. high debt levels in comparison with those in earlier cycles may also have contributed to this relatively prolonged downturn. nevertheless, for this year, the economy of the eurozone is expected to grow with 1. 6 % and with 2. 4 % in 2005. like in the netherlands, this turnaround has been mainly driven by rebounding exports due to the recovery of global trade. in addition to the strengthening of external demand, domestic expenditures in the eurozone will take their part in the recovery. with respect to household spending, both short - term and long - term interest rates are at historical lows, which have eased debt servicing costs of households. of course, the fact that interest rates are so low, also raises the risk of renewed increases in the future, with possible adverse effects on households ’ debt profile. furthermore, although the appreciation