mr noyer : monetary policymaking in the euro area speech delivered by mr christian noyer, vice - president of the european central bank, at pareto fonds ’ 2000 economic forum, oslo, on 23 march 2000. * * * ladies and gentlemen, it is a pleasure and an honour for me to speak here at the pareto fonds ’ 2000 economic forum in oslo. the economic conferences organised by the pareto fonds have an outstanding reputation for presenting a unique opportunity for investors, economists and policymakers to conduct an in - depth exchange of views on current issues of monetary policy. in january 1999 the euro was successfully launched as the single currency for the 11 countries comprising the euro area. for more than a year, the eurosystem, which includes the european central bank ( ecb ) and the 11 national central banks ( ncbs ) of the countries which have introduced the euro, has been in charge of the single monetary policy for the euro area. of course, it is much too early to make a detailed assessment of the achievements of the single monetary policy. nevertheless, the first 15 months of the euro have been encouraging and there are good reasons to look to the future with optimism. owing to very careful technical and conceptual preparations, both the monetary policymaking process and the implementation of monetary policy decisions have functioned efficiently from the very outset. at the same time, there can be no doubt that there is room for further improvement and that important challenges still lie ahead. in my remarks today, i shall describe the main features of monetary policymaking in the euro area, focusing in particular on the monetary policy objectives of the eurosystem, the stability - oriented monetary policy strategy and on some of the communication issues raised by the strategy. moreover, i shall briefly highlight the current economic outlook for the euro area. price stability as the primary objective of the single monetary policy of the eurosystem the treaty establishing the european community clearly states that the primary objective of the single monetary policy shall be to maintain price stability. furthermore, the treaty requires that, without prejudice to the objective of price stability, the eurosystem shall support the general economic policies in the european community with a view to contributing to the objectives of the community. the latter include, inter alia, sustainable and non - inflationary growth and a high level of employment. the treaty therefore establishes a clear sequence of objectives for the monetary policy of the eurosystem, with price stability unambiguously being the sine qua

level recorded for the first quarter of 1999. overall, the upward pressures on consumer price inflation were regarded to have become greater and more protracted than previously foreseen. against this background, the interest rate steps taken can be understood as pre - emptive measures aimed at maintaining price stability in the medium term. currently, the prospects for strong economic growth are very favourable. the strengthening of economic activity in the euro area in the second half of 1999 was confirmed by a first estimate of euro area real gdp growth for the fourth quarter of 1999. real gdp is estimated to have increased by 0. 9 % quarter - on - quarter, following an increase of 1. 0 % in the previous quarter. in addition, the latest survey data indicate a continued improvement in economic activity. area - wide industrial confidence increased further in the first two months of this year ; it has now recovered from the effect of the slowdown in 1998 - 99 and stands again at the previous peak of april 1998. moreover, the purchasing managers ’ index signals improved business conditions in the manufacturing sector. the cyclical upswing should extend well into 2000 and continue thereafter. this is also confirmed by the available forecasts, which indicate a real gdp growth of slightly over 3 % in 2000, reflecting both the favourable external environment and buoyant domestic demand. as for 2001, the economic expansion in the euro area is generally expected to continue at a similar pace. in this environment, employment is expected to increase further and the still very high level of unemployment should continue to fall. thus far, recent wage growth has been moderate and the same applies for actual wage settlements to date. it remains important not to jeopardise the expected improvements in economic conditions and labour market prospects through inappropriate wage settlements. in fact, wage moderation would help both to contain inflation in the euro area and lead to further progress in employment creation. with regard to fiscal policies, the current upswing provides a good opportunity to comply more quickly with the objectives of the stability and growth pact, and thereby to add substantively to the favourable economic conditions. let me conclude by stressing that economic conditions and prospects for the euro area appear to be better at present than at any time in the past decade. growth is strong, employment is expected to increase further and the still high level of unemployment should continue to fall. maintaining price stability and pursuing structural reform is the foundation for a sustained period of strong economic expansion and a lasting process of job creation.