to be monitored closely. cross - checking this with our regular monetary analysis indicates that there is substantially more liquidity in the euro area than is needed to finance non - inflationary growth. this also supports the case for strong vigilance with regard to the materialisation of risks to price stability. having given you an overview of the current state of the euro area economy, and some prospects for the near future, i would like now to address some of the conditions that need to be in place to ensure sustainable growth. conditions for sustainable growth the key to the achievement and maintenance of strong growth in europe requires a perspective that extends beyond shorter - term cyclical developments. there is an urgent need to promote growth - orientated economics strategies, including the stimulation of productivity and employment rates, within a framework of sound fiscal and macroeconomic policies. it is widely recognised that the accelerated implementation of structural reform, framed within the lisbon agenda, is the key to making the eu economies more competitive and dynamic. structural reforms that are designed to increase the flexibility of markets, open the path to achieving higher sustainable growth, increasing employment, promoting innovation and securing the sustainability of social security systems in the eu. tackling structural problems in european labour markets is essential to this process. particularly difficult challenges for europe include reducing the high level of structural unemployment, including youth unemployment, and increasing the relatively low level of labour market participation, particularly of older workers, that persist in european labour markets. overall, there is quite a distance to bridge before europe reaches one of the key goals that has been set in the lisbon agenda, namely an employment rate of 70 %. some countries have started to undertake the needed reform their social security systems to reduce the disincentives to work currently created within many european labour markets. unemployment schemes have been amended and early retirement incentives have been reduced. but more progress of this type is necessary to attract more people into the labour market, particularly as europe ’ s population becomes older in the face of demographic change. here the remarkable experiences of ireland provide a strongly positive example. ireland ’ s economic success can be linked to the successful transformation of its labour market into a plentiful supply of competitively priced and quality labour resources. its experiences demonstrate that policies to increase the flexibility of labour markets can bring with them the opportunity for long term positive effects on growth performance. stronger product market competition is also a central instrument for boosting growth in europe. eu countries, including ireland, have made significant progress in product market reforms during

ben s bernanke : semiannual monetary policy report to the congress testimony of mr ben s bernanke, chairman of the board of governors of the us federal reserve system, before the committee on financial services, us house of representatives, washington dc, 18 july 2007. * * * chairman frank, ranking member bachus, and members of the committee, i am pleased to present the federal reserve ’ s monetary policy report to the congress. monetary policy report to the congress. as you know, this occasion marks the thirtieth year of semiannual testimony on the economy and monetary policy by the federal reserve. in establishing these hearings, the congress proved prescient in anticipating the worldwide trend toward greater transparency and accountability of central banks in the making of monetary policy. over the years, these testimonies and the associated reports have proved an invaluable vehicle for the federal reserve ’ s communication with the public about monetary policy, even as they have served to enhance the federal reserve ’ s accountability for achieving the dual objectives of maximum employment and price stability set for it by the congress. i take this opportunity to reiterate the federal reserve ’ s strong support of the dual mandate ; in pursuing maximum employment and price stability, monetary policy makes its greatest possible contribution to the general economic welfare. let me now review the current economic situation and the outlook, beginning with developments in the real economy and the situation regarding inflation before turning to monetary policy. i will conclude with comments on issues related to lending to households and consumer protection - topics not normally addressed in monetary policy testimony but, in light of recent developments, deserving of our attention today. after having run at an above - trend rate earlier in the current economic recovery, u. s. economic growth has proceeded during the past year at a pace more consistent with sustainable expansion. despite the downshift in growth, the demand for labor has remained solid, with more than 850, 000 jobs having been added to payrolls thus far in 2007 and the unemployment rate having remained at 4 - 1 / 2 percent. the combination of moderate gains in output and solid advances in employment implies that recent increases in labor productivity have been modest by the standards of the past decade. the cooling of productivity growth in recent quarters is likely the result of cyclical or other temporary factors, but the underlying pace of productivity gains may also have slowed somewhat. to a considerable degree, the slower pace of economic growth in recent quarters reflects the ongoing adjustment in the housing