finances in the euro area. it is imperative that member states, the commission and the council, in fulfilling their respective responsibilities, implement the revised framework in a rigorous and consistent manner. sound fiscal policies, together with a stability - oriented monetary policy, are fundamental to the success of economic and monetary union. for its part, the ecb will not waver in its commitment to delivering price stability. the lisbon strategy let me now turn to the recently concluded mid - term review of the lisbon strategy. five years after the launch of the strategy, there is broad agreement that progress in structural reforms has been mixed. on the positive side, some eu member states have made good progress towards implementing reforms in recent years. however, much still needs to be done if europe as a whole is to face successfully the challenges of technological change, globalisation and ageing populations. in this context, the ecb welcomes the presidency conclusions of the brussels european council of 22 and 23 march 2005, which state that “ it is essential to relaunch the lisbon strategy without delay and refocus priorities on growth and employment ”. member states urgently need to promote innovation and human capital formation, establish a regulatory environment which is friendlier for businesses, accelerate market liberalisation and increase labour utilisation and labour market flexibility. against this background, attention must now shift towards implementing the newly refocused lisbon agenda. closing the implementation gap in all member states is essential in order to reap the full benefits of structural reforms in terms of a higher growth potential and a higher employment rate in the medium term, as well as improved consumer and business confidence in the short term. the new governance framework introduced by the european council should support this process by fostering effective decision - making and priority - setting, and by increasing national ownership. peer support and, where necessary, peer pressure need to be employed to push the lisbon strategy forward. in this context, benchmarking on the basis of sensibly defined quantitative indicators, taking account of national circumstances, would be a useful tool and a welcome driver for public discussion. moreover, this would raise public awareness of the fact that successful implementation of structural reforms is indeed possible in eu member states and would show that structural reforms lead to important benefits. as for the ecb, we will continue to support the lisbon process by maintaining price stability, which fosters sustainable output growth, employment and social cohesion. at the same time, comprehensive structural reforms aimed at increasing flexibility and competition in labour,

have agreed. sovereignty as a positive concept sovereignty in the european union is not only a normative concept linked to the rights of states. it is also a positive concept. a sovereign that cannot effectively deliver the expectations of its citizens is only sovereign in name. genuine sovereignty exists only if policy - making is effective. this notion of the efficacy of public powers is reflected in the principle of subsidiarity embedded in the eu treaties – or what is known as the federalist principle in the united states – the logic of which was elegantly captured by john locke in the 1680s : bis central bankers ’ speeches “ for all power given with trust for attaining an end, ( … ) whenever that end is manifestly neglected ( … ) that power must devolve in the hands of those that gave it, who may place it anew where they shall think best for their safety and security ”. european integration has, in effect, been a process of progressively applying this principle : governments have pooled sovereignty every time it has proved necessary so that they could continue to deliver on their duties towards their people. at the start of the process, the objective was to prevent continental war. two world wars had demonstrated the inability of european governments, acting alone, to provide physical security for their citizens. thus, they established common institutions, such as the coal and steel authority, that could guarantee peace more effectively. in parallel, and quite independent of policy actions, economic integration has also progressed, in a more gradual but also more continuous process. such integration results indeed at least as much from technological developments and improvements in transportation and communication as it does from policy choices. it is, in large parts, inescapable. but because it creates far - reaching interdependencies, it has required governments to respond. they have had to proactively choose to pool sovereignty to regain control of their economies. with the establishment of the single market, in particular, the pace and reach of integration accelerated markedly. this was of course its purpose – and it remains the most significant and successful achievement of the european union. but a free market does not only assume the freedom to take part. it also assumes the means to protect that freedom, by which i refer to the protection of property rights, the enforcement of contracts, the conditions of fair competition and the avoidance of moral hazard. economic integration therefore required integration of some economic policies. the euro itself emerged in fact as a corollary of the single market. it was