%. it has occasionally risen above the 2 % ceiling as a result of temporary disturbances, such as the recent hike in oil prices. however, when such shocks occur, it is important for us to ensure that price stability is maintained over the medium term. in this regard, it is worth mentioning that inflation expectations over the next 10 years ( as measured in particular by consensus economics ) have never exceeded 2 % since the introduction of the euro, i. e. exactly at the level consistent with a definition of price stability – “ below but close to 2 % ”. during the last seven years, monetary policy in the euro area has been successful in maintaining stable prices, thereby making the best possible contribution it can make to sustained output growth. along the way, stability - oriented policies have also directly improved the well - being of households, inter alia, by supporting the purchasing power of their income and savings. nominal and real interest rates have remained at low levels ever since the euro was introduced and are expected to stay at historically low levels over a long period of time. looking back in time, it is interesting to note that, all along the yield curve, market interest rates in euro area countries became aligned with the lowest – instead of the average – rates prevailing prior to the euro. this low level of interest rates is of course supportive of the economic recovery in the euro area, while at the same time being consistent with price stability over the medium term. moreover, interest rates have over time reflected a high degree of “ consonance ” between the european central bank ’ s policy intentions and the market views concerning the course of policy. such a level of predictability of policy, which signals a high degree of transparency, is particularly rewarding, considering that a significant part of our job is devoted to explaining and discussing our actions and our goals to the public. transparency is a precondition for accountability and improves communication with the public regarding how the european central bank conducts monetary policy, thereby fostering predictability and making policy much more effective. in this regard, allow me to stress that the european central bank was the first major central bank to introduce a real - time press conference displaying in detail the diagnosis and the monetary policy decisions of the governing council. another important result of monetary unification is the increase in european financial integration. a large, liquid and integrated money market was created after 1 january 1999. the euro bond market quickly turned into the second largest bond market in the world. within the euro area, the

elimination of exchange rate risks and the lower transaction costs which followed have created new opportunities for businesses, thereby being conducive to a more efficient allocation of capital. as a result, european firms have attained higher levels of efficiency and competitiveness, which is by itself supportive of greater potential growth in the long term. emu itself has contributed to further reducing financing costs owing to the lower premia associated with the increased focus on stability - oriented economic policies. the available data indicate an overall high degree of integration in the euro area money market following the introduction of the euro, as illustrated in particular by the drop to close to zero in the cross - country standard deviations of unsecured money market rates. government bond yields have converged in all euro area countries and increasingly tend to be driven by common news. ten - year euro area government bond yields are currently at levels significantly below 4 %. furthermore, financial deepening is evident in the rapid growth of new market segments, such as the corporate bond market, reinforcing the access of investors to funds and thereby contributing greatly to economic growth. finally, measures of cross - country equity flows point to a rising degree of integration, with the advantages of sectoral diversification gaining ground over those of geographical diversification. productivity and growth let me now turn to the major challenges facing us. first of all, i will refer to the medium - to long - term trends for growth and productivity. if we compare growth in the us and the euro area since the mid1990s, we find that it has been significantly higher in the former. between 1996 and 2005, average real gdp growth per year was 3. 3 % in the us and 2. 1 % in the euro area. the difference between the growth performance in these two economies is partly related to demographic trends. however, it also stems from higher productivity growth in the us. labour productivity growth ( per hour worked ) was 1. 3 % in the euro area during the period 1996 to 2005 compared to 2. 3 % in the us. over the same period, the annual rate of increase in employment ( in terms of hours worked ) was around 0. 8 % in the euro area, which was only moderately below that in the us, at 0. 9 %. it is worth mentioning the euro area experienced a slowdown in labour productivity growth ( per hour worked ) at around year 2000, with productivity growth declining from 2. 0 % in 1996 - 2000 to 0. 8 % in