it appears that the level of industrial production stabilised over the first few months of 1999 ; a clear improvement compared with the pronounced decline of around 1 % in the last quarter of 1998. there have also been positive indications of economic activity in the euro area in recent business and consumer surveys. in particular, there was a further slight rise in business confidence, supported by an improvement in production expectations and a more favourable assessment of export order books, which may be seen as representing the more forwardlooking components of the survey. at the same time, consumer confidence remains at an extremely high level ; this is consistent with the fact that private consumption has remained robust, supported by real income growth and higher employment. with regard to developments in the external environment of the euro area, there have been some positive signs. us growth is expected to remain strong in the near term, forecasts of growth for the united kingdom ( a significant trading partner for the euro area ) have recently tended to be revised upwards and, of course, the kosovo conflict has ended. there are also indications that prospects for several emerging economies have improved as financial turmoil has subsided and access to international capital markets has become easier. overall, recent forecasts for the world economy suggest that the outlook has stabilised and the risk of a global recession has receded. in all, there have been some indications of a turnaround in the industrial sector and of an improvement in the external environment. overall, growth is expected to strengthen in the course of this year and next. most observers now expect that real gdp growth in the euro area will be around 2 % this year ( compared with close to 3 % in 1998 ) and 2. 5 % or more in 2000. prices in response to these new data indicating a stabilisation of overall output growth in early 1999 and an economic recovery during the second part of 1999 into the year 2000, market participants appear to have shifted their expectations towards a faster pace of economic growth. combined with recent monetary and credit developments, this suggests that downward risks to future price stability have receded further. on the other hand, all indicators we use in our monetary policy strategy do not signal upward inflationary pressures. this is true for money, with a development of m3 that remains close to the reference value, and also for the other indicators ( combining financial market and real economy indicators including wage developments ) that we use in our broadly - based assessment of the outlook for price developments. the euro area yield curve has steepened somewhat more recently

economic and monetary union in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively to raising the longer - term growth potential of the euro area and reducing its vulnerabilities. sound fiscal and economic policies at the national level are the first line of defence to make the euro area stronger. economic reform needs to be substantially stepped up in euro area countries to increase resilience, reduce unemployment in a lasting way and boost productivity. the country - specific recommendations that the european commission will publish next month will lay down the main reform priorities to be implemented. on the fiscal side, the mildly expansionary euro area fiscal stance and the operation of automatic stabilisers are providing support to economic activity. countries which have fiscal space should use it in a way that makes their economies stronger and more resilient for the future. at the same time, countries where government debt is high, including france, need to continue rebuilding fiscal buffers. all countries can and should reinforce their efforts to achieve a more growthfriendly composition of public finances. the euro ’ s benefits, however, will not fully materialise for as long as the architecture of economic and monetary union ( emu ) remains incomplete. material progress has been achieved in recent years. the european stability mechanism has 2 / 4 bis central bankers'speeches become established as an important safeguard and the reforms currently being discussed will provide it with new instruments to better protect member states, keeping in mind the longer - term objective of making it a community institution accountable to the european parliament. the creation of banking union, meanwhile, has considerably strengthened the resilience of the euro area financial sector and, together with the bank recovery and resolution directive, has created instruments to combat banking crises in a way that is swifter and fairer than in the past. banks directly supervised by the ecb have built up strong capital positions in recent years, with a common equity tier 1 ( cet1 ) ratio of 14. 3 % at the end of 2018 compared with 11. 3 % at the end of 2014, and have substantially reduced non - performing loan ratios. these are important steps forward as euro area firms rely to a very large extent on bank credit to finance growth and investment. let us also keep in mind that these measures build on the achievements of ten years of financial regulatory reform, which should not be reversed. so what more should be done at the european level? first, we need to further strengthen the ability of