to ensure a firm anchoring of medium - term inflation expectations. such anchoring is indispensable to supporting sustainable growth and employment and contributes to financial stability. accordingly, we will continue to monitor very closely all developments over the period ahead. regarding fiscal policies, the latest projections by the european commission point to a sharp increase in the euro area general government deficit and debt ratios in 2009. the deficit ratio is projected to rise to 5. 3 % of gdp in 2009 and further to 6. 5 % in 2010, from 1. 9 % in 2008, with the debt ratio exceeding 80 % of gdp in 2010. a large majority of euro area countries are expected to exceed the 3 % of gdp deficit reference value in 2009 and 2010. to ensure trust in the sustainability of public finances, an ambitious and credible adjustment effort will be required to return as soon as possible to sound fiscal positions, supported by a full application of the provisions of the stability and growth pact. the rapid attainment of sound fiscal positions will be necessary to enable countries to deal with the additional fiscal burden owing to demographic ageing as well as the risks arising from government guarantees that were provided to stabilise financial sectors. turning to structural policies, there is a strong case for undertaking further efforts to support potential growth in the euro area. it is crucial that the focus is now on strengthening the adjustment capacity and flexibility of the euro area economy in line with the principle of an open market economy. in this respect, the current situation can be seen as a catalyst to accelerate the implementation of necessary domestic reforms, notably labour market reforms to facilitate appropriate wage - setting and labour mobility across sectors and regions, as well as product market reforms to foster competition and speed up restructuring and productivity growth. at the same time, many of the policy measures taken in recent months with a view to supporting specific segments of the economy need to be phased out in a timely manner. we are now at your disposal for questions.

on the inflation front europe - wide? the oil price trend creates inflationary pressures over the short term. if the oil price were to remain in excess of but not far above $ 40 / barrel for some time, inflation in the euro area would exceed 2. 0 % per annum ( it stood at 2. 4 % in july - editorial note ) until the end of 2004 and for a few months in 2005. that being said, from our point of view, and taking account of the likely influence of all the determinants of price developments, we believe that annual inflation will average below 2. 0 % in both 2005 and 2006. despite the increase in the oil price, wage moderation has been striking. in germany, what is more, the two sides of industry have struck agreements in some sectors in favour of an increase in the working week without any wage increase. indeed, until now, there have been no signs of inflation spilling over into wages. wage moderation has helped to contain inflationary pressures, partly due also to the high unemployment rate in the euro area and the gradual pace of the recovery. it is interesting to note that the annual growth rate of compensation per employee declined to 1. 9 % in the euro area in the first quarter of 2004. total hourly labour costs increased by 2. 5 % in the same quarter, somewhat faster than in the previous quarter, but still moderately. that being said, we are keeping a close watch : we want to prevent the recent increase in inflation and, in particular, the visible rise in oil prices from spilling over into wages. what we said in july still stands : we remain vigilant and we are monitoring the situation and all the risks to price stability very carefully. there is, however, no bias regarding the monetary policy stance in the future. in its latest report on the euro area, the imf said it took a cautious line on the monetary union ’ s economic prospects. while it was about it, it lowered the euro area ’ s non - inflationary potential growth from 2. 5 to 2. 0 %. first of all, i would point out that the imf estimate is broadly similar to that of the ecb ( 2. 0 - 2. 5 % ), it is equal to the lower limit of the range of our estimated potential growth. however, these estimates are surrounded by many uncertainties : the european economy ’ s modest growth performance in recent years and the progressive ageing of the population may have