and business confidence. the eurosystem also examines forecasts of the economic outlook and produces such forecasts itself. they are one piece of information in the second pillar. on the basis of both pillars, central bank interest rates are set at the level which is deemed to be appropriate to maintain price stability in the medium term. defining the appropriate stance of monetary policy for an area the size of the euro area remains particularly challenging. on the other hand, experience over the last year has clearly demonstrated that there are no insuperable impediments to the conduct of a truly single monetary policy for the euro area. this is underpinned by the proven ability of the eurosystem to act decisively, noted by its decisions to cut interest rates in april and to raise them in november. at the same time, this is also evidenced by the prevailing climate of price stability, with price increases of around 1 % for the euro area on an average annual basis. the outlook for price stability is also favourable, although inflation is expected to rise somewhat in the near future. this is mainly a result of the recent strong increase in energy prices. the fact that regional discrepancies in price increases amounted to up to 2 percentage points does not, by any means, conflict with this assessment. this phenomenon, which is almost typical for large - sized monetary areas and is also to be found in the united states, can reasonably be explained. * * * so far, i have limited myself to considering the internal aspects of emu, but the introduction of the euro also has implications that extend far beyond the boundaries of the european union. as the currency of an economic area with a population of nearly 300 million people and one sixth of the world ’ s gross domestic product ( gdp ), the euro is already the second most widely used currency in the world after the us dollar. moreover, as investor confidence grows and as more eu member states join the euro area, in particular following eu enlargement, the euro ’ s role as an international currency is destined to gain in importance. this is not to say that the eurosystem will actively promote an international role for the euro, or that there is a policy of trying to supplant the us dollar as the world ’ s leading currency. rather, by adopting a neutral stance, the pace with which the euro acquires its international role - whether as a trade currency, an investment currency or as a reserve currency - will be left primarily to

ecb and the 11 national central banks of those countries which have adopted the euro, and which has been adopted as a “ user friendly ” expression to denote the form in which the escb performs its tasks and responsibilities. the eurosystem is set up, like the federal reserve system, in a distinctively decentralised manner. at the same time, however, the eurosystem disposes of marked centralised structures, since the definition and implementation of the single monetary policy are carried out under the exclusive responsibility of the decision - making bodies of the ecb. these are, first of all, the governing council, which defines the single monetary policy for the euro area and takes all other decisions of fundamental importance to the eurosystem. the members of the governing council are the governors of the 11 national central banks and the six members of the executive board of the ecb. basically, all decisions are taken by simple majority, whereby each member has one vote. the other important decision - making body is the executive board of the ecb, which is basically responsible for the implementation of monetary policy in accordance with the decisions taken by the governing council. against the background of this centralised decision - making structure, the role of the 11 national central banks consists mainly of the practical implementation of monetary policy and other tasks of the eurosystem, such as the issuance of banknotes, the collection of monetary statistics or the operation of the eurosystem ’ s payment systems. the fact that these tasks have to be carried out on the basis of agreed rules and specific instructions given by the decision - making bodies of the ecb, however, by no means lessens the importance of the national central banks in the overall set - up of the eurosystem. * * * another particular characteristic of emu is that, while monetary union has led to the introduction of a single monetary policy, economic union has not resulted in the development of other common macroeconomic policies, which instead remain in the hands of the national governments of the union ’ s member states. with a centralised monetary policy and decentralised fiscal and structural policies, the economic and monetary pillars of emu can appear to be somewhat uneven at first glance. but we should not be fooled by appearances. in fact, the structure of emu ’ s economic pillar reflects the need to strike an appropriate balance between providing flexibility and diversity, while - at the same time - ensuring that all of the economic policies of the euro area contribute to