would probably dampen both foreign and domestic demand. finally, the effects of oil prices on growth and inflation will not depend only on the amplitude and duration of the oil price rise, but also on the appropriateness of the responses of our authorities and economic agents. lessons learned from the bad experience of the 1970 ’ s, when there were desperate attempts to compensate the consequences of the oil shock by lax budgetary and wage policies, must not be forgotten. most forecasting institutes expect for the euro zone this year and next year growth rates between 2 and 2. 25 p. c. close to the growth potential of the zone. that would be good to have but that should not be a reason to be satisfied. what is needed are efforts to make the european economy more resistant to external shocks as those which have reduced its growth in the latest years and to increase its long term growth potential. europe has to cope with a structural problem of low economic growth. the growth performance of the euro area is weak from an international point of view, in particular compared to the united states : over the past 10 years the american economy has shown an average gdp growth of 3. 3 p. c., while the euro area could only reach an economic growth of 2 p. c. it is necessary to specify that given unequal population growth further analysis shows that the difference in real gdp growth is half the size if calculated in per capita terms ( per head ). the fact remains however that since the mid 90 ’ s the gap in product or income per head between the us and the euro zone has significantly widened. macroeconomic policies are not the explanation of the weaker growth in the euro zone. first of all this is true for monetary policy. in less than six years the new ecb has gained a high degree of credibility. the euro zone has witnessed a period of low rates of inflation and low levels of short term and long term interest rates. for months the ecb ’ s nominal central rate has been maintained at 2 p. c., that means zero in real terms, and the level of market long term interest rates ( the most important rates in the euro zone for the financing of investments by enterprises, households and government ), which has fluctuated around 4 p. c., is lower than in the us. in the fiscal sphere, almost all the governments in the euro zone allowed the automatic stabilisers to take full effect during the recent slowdown, and that effect was often reinforced by discretionary

event occurred immediately after a period of sluggish economic growth which left the european economy somewhat weakened. therefore, the enlargement, instead of generating enthusiasm, has in many instances given rise to misgivings among the population and even among the enterprises. the concern regards the possible delocalisation of enterprises and significant job losses. at the microeconomic and sectorial level, the integration of the new member states will undoubtedly entail some adjustments and shifts - it would be naive to claim otherwise - but overall it should result in a win - win situation. the past decade has already brought a strong expansion of trading links between the old and new eu member states. as purchasing power in those countries catches up and their markets become more accessible, western european firms are set to expand their potential outlets while the continuing dismantling of trade barriers and harmonisation of the regulatory framework will gradually create a level playing field. the expansion of trade leading to increasing specialisation, and hence greater productivity, as well as consumers having a wider choice will produce benefits that are much larger than the cost of integration. these two recent major events show that insufficient growth is a real cause for concern for the people in our countries who feel insecure about their employment. this factor obscures the achievements european integration has reached and so prevents people from believing in the dynamism of the european unification. for the coming months a cautious optimism is justified. mainly driven by the strong growth in the us and asia, economic activity has been higher than expected in the euro zone in the first half of this year. the conditions for a continuation of the recovery remain in place. economic growth outside the euro zone should continue to support euro area exports. on the domestic side, strong foreign demand and firm activity growth should sooner or later revive investment and employment. at this stage, the signs pointing to a broader - based recovery are mixed, with non negligible variations across countries, e. g. the recovery has been stronger and broader - based in belgium than in germany as was confirmed again today by the publication of preliminary figures for the third quarter. the scenario of an ongoing recovery is, as is frequently the case, subject to some risks. the main risk relates to oil prices. the recent rise in oil prices has been proportionally smaller than in previous episodes, particularly when expressed in euro, and since the 1970 ’ s, the oil intensity of production in the euro zone has fallen significantly. nevertheless, persistently high and even further increasing oil prices