##ng perspective, focusing on the medium - term trends in inflation and the compatibility of these trends with the eurosystem ’ s definition of price stability. by adhering to this strategy, the eurosystem ’ s monetary policy contributes to creating the economic conditions which are essential to exploiting the considerable growth potential of the euro area and to reducing uncertainty about future economic developments. i should like to take this opportunity to explain the current assessment, which is in line with the governing council ’ s expectations at the beginning of april. with regard to the first pillar of the eurosystem ’ s monetary policy strategy, monetary growth cannot be seen as signalling upcoming inflationary pressures at this stage. since the beginning of this year, the three - month moving average of m3 growth has been close to the reference value of 4. 5 %. for the period from january to march 1999 the average growth rate increased somewhat to 5. 2 %. this observation may, however, have been affected by special factors prevailing at the start of stage three. therefore, in its current assessment the governing council does not regard current monetary trends as constituting a signal of future inflationary pressures. with regard to the second pillar of the eurosystem ’ s monetary policy strategy, the broadly based outlook for price developments and risks to price stability and various indicators of future price developments and economic activity in the euro area indicate a favourable outlook for price stability. financial indicators such as the very low level of long - term interest rates point to low inflation expectations and the credibility of monetary policy. following the cut in short - term interest rates, long - term rates decreased somewhat initially, which confirms that the market considered the cut in interest rates by the ecb to be appropriate. more recently these rates have risen somewhat, mainly as a reflex to the strong increase in longterm interest rates in the united states. regarding economic activity in the euro area, data available for the first two months of 1999 do not yet reveal evidence of a rebound in economic growth. labour market indicators show signs of a somewhat decelerating level of employment growth towards the end of 1998. meanwhile, preliminary april figures from the european commission on confidence indicators point towards some first signs of an improvement in industrial confidence. recent price trends have been consistent with price stability. inflation for the euro area as measured by the harmonised index of consumer prices ( hicp ) has been close to 1 % since the fourth quarter of 1998. as has been emphasised on previous occasions, the current low

an early stage. in the case of non - adherence to agreed fiscal and economic rules, sanctions will be applied in a more automatic manner to reduce the potential for political interference and delay in the process. further improvements are currently under consideration, such as the mandatory submission of draft national budgets to the group of euro area finance ministers – the so - called “ eurogroup ” – for vetting before those budgets are submitted to national parliaments for adoption. the vetting should ensure that divergences from the fiscal rules can be identified and corrected at a very early stage. moreover, earlier this year, 25 out of 27 eu member states signed the treaty on stability, coordination and governance in the economic and monetary union, more generally known as the fiscal compact. the compact further improves the emu framework by introducing a cyclically adjusted balanced - budget rule which the participating countries need to transpose into national legislation. finally, a temporary crisis resolution mechanism was created, the european financial stability facility ( efsf ), which will remain active until july 2013 despite being replaced by a permanent organisation this autumn, the european stability mechanism ( esm ). with a combined maximum firepower of €700 billion, these two mechanisms will help to build effective firewalls to stem contagion from the crisis. what has been achieved so far is impressive. prior to the crisis, very few would have expected that member states would reach a consensus on such fundamental changes in the way emu works. but these changes are not enough. emu now needs a longer - term vision to confront its challenges. bis central bankers ’ speeches 3. 3. the way ahead – deeper integration in order to restore confidence, policy - makers in the euro area need to resolutely push ahead with fiscal consolidation, structural reforms to enhance competitiveness and european institution - building. recently, the president of the european council, in close cooperation with the presidents of the eurogroup, the european commission and the european central bank, put forward proposals for a genuine emu. the four presidents are proposing that a genuine emu should be built on integrated frameworks for budgetary policies, economic policies and financial market policies, which in turn must be underpinned by greater democratic legitimacy and accountability. when we look at the options to establish budgetary policies in a monetary union, and exclude any uncoordinated conduct of fiscal policy by member states, three possible models come to mind. first, there could be a fully - fledged fiscal union