the euro into the turkish economy. the first positive effect is that elimination of the transaction costs arising from a multitude of european exchange rates has encouraged the use of the euro as a unit of currency. between 1994 and 1998, the euro ’ s share in the current account ’ s foreign exchange receipts averaged 37 % and in its foreign exchange expenditures averaged 32 %. eighteen months after the introduction of the euro, these figures have barely changed : the respective shares are 40 % and 33 %. the second positive effect is that the convergence criteria of the maastricht treaty, and the copenhagen criteria, require economies seeking to join the eu and emu to become efficient market economies and achieve a high degree of verifiable convergence with the eu. as we all know, the requirements include price stability, low market - based interest rates, stable exchange rates, and sustainable public finances. and whether or not it is considered immediately important for turkey to become a member of emu, these convergence criteria can give us an effective means of disciplining our economy. this is why we have launched a comprehensive disinflation program aimed at reaching single - digit inflation and eliminating macroeconomic imbalances by the end of 2002. winning for turkey the possibility of membership in the eu and emu is one of the main goals of our program. the ideal of independent central banks is a core issue for the countries of the european union. we are currently in the process of examining our banking law to determine what must be done to bring it up to the standards promulgated by the european system of central banks. new modifications are planned to make price stability the principal goal of monetary policy. debt monetization will no longer be allowed. the new law will also grant more independence to the central bank. before ending these remarks, i want to point out that introducing a single currency and reaping the full benefits of doing so is a long - term endeavor. for the time being, turkish monetary policy is directed towards a single transparent objective, that of price stability. price stability will serve as a link between the initial expectations about the euro area and the potential economic benefits of a single currency system. the reforms and changes executed up to now will provide a base for ambitious future policies that will broaden the area of integration and encourage the faith of economic agents that the area offers additional benefits such as greater price transparency, improved efficiency, growing investments and economic activity, and a more competitive environment. and no doubt the world economy

with a marked contribution of about 3. 4 percent on headline inflation. the contribution of food prices to the headline inflation in 2007 was significantly higher than it had been in the past three years ( figure 2 ). figure 2 : contribution to end - year cpi inflation ( percentage share ) average of 2004 - 2006 food * 24 % others 30 % food * 41 % others 49 % energy 17 % tobacco * * 10 % tobacco * * 10 % energy * food : food and non - alcoholic beverages * * tobacco : tobacco products and alcoholic beverages source : turkstat, cbrt. another major factor slowing down the disinflation process in 2007 was the adverse developments in energy and administered prices. the crude oil price in december 2007 was nearly 50 percent above the levels registered at the end of 2006. this development, together with the changes in special consumption tax on fuel products, led to a significant rise in prices of fuel - oil products in 2007. meanwhile, another energy item, housing water prices, which is administered by municipalities, edged up in the last quarter of 2007, partly owing to the drought conditions. overall, 1. 6 points of the headline inflation resulted from the energy price hikes, where the contribution of administered component outweighs that of the oil price ( table 1 ). while food, energy and tobacco products displayed significant increases in 2007, the fast pace of disinflation in services and core goods excluding food, energy and tobacco in 2007, confirms that supply side shocks were mainly responsible for the breach of the uncertainty band ( figure 3 ). figure 3 : subcomponents of cpi ( annual percentage change ) energy food * tobacco * * goods excl. food, energy and tobacco services source : turkstat, cbrt. table 1 : contribution to annual cpi inflation ( percentage points ) energy food * tobacco * * goods excl. food, energy tobacco services 1. 57 3. 42 0. 87 0. 24 2. 28 1. 51 3. 09 0. 28 1. 43 3. 33 * food : food and non - alcoholic beverages * * tobacco : tobacco products and alcoholic beverages. source : turkstat, cbrt. distinguished guests, elevated prices of crude oil, agricultural products and other commodities exert inflationary pressures all over the world. recently, both the developed and emerging economies have been facing a rise in inflation. inflation in turkey followed a more favorable trend in 2007 compared to other emerging economies under inflation targeting, notwithstanding the administrative price hikes