large - scale purchases of government bonds may affect the relationship between the central bank and the fiscal authority. what i am not sure of is when such a relationship can be characterised as “ problematic ” or “ unproblematic ”. reading the paper, i gained the impression ( perhaps wrongly ) that a “ problematic ” relationship is one in which monetary and fiscal policies are distinct, as is the case in the euro area. i would then like to ask : “ just where is the problem if monetary policy is kept distinct from fiscal policy, and cannot be manipulated by the fiscal authorities to solve budgetary problems? ” perhaps it is a problem for the fiscal authorities, because they would like to use the instrument of monetary policy to inflate away the fiscal problems and have, instead, to resort to fiscal measures that are subject to parliamentary approval and that all citizens are able to judge and assess. it seems to me that it is not a problem for the citizens at large, especially for the less wealthy, that fiscal problems are not solved through the inflation tax or by keeping the rate of interest on public debt instruments artificially low. to be sure, for the european population at large, the role of the central bank should remain distinct from that of the fiscal authorities, and monetary policy should remain firmly in the hands of the central bank. this is why the prohibition of monetary financing of the government and the independence of the central bank have been enshrined in the treaty. it is the best way to ensure that budgetary problems are addressed in a democratic way, rather than through the manipulation of the currency, which has hidden distribution effects on the population. in greece, ireland and spain, in france and germany, the governments are adopting budgetary policies in full awareness of the fact that they cannot count on the inflation tax to solve their fiscal challenges, challenges that all advanced societies have to face. can we consider this to be a problem? let me conclude on a broader issue, related to the title of the conference : transatlantic relationship in an era of growing economic multipolarity. at many of the conferences on trans - atlantic relations that i have attended in the past, participants often discussed the decreasing relevance of these relations in the light of the new emerging global powers. interestingly, when we get to discuss monetary issues, trans - atlantic relations remain important. the reason is that they are the only relevant ones. a great deal of attention seems to be devoted to potential – and i would add, minor

size and structure of their economies, the present state of their fundamentals, and the monetary and exchange rate regimes that are currently in place. the wide diversity across the new member states implies that the economic situations and strategies of countries will have to be assessed on a case - bycase basis. against this background, it is natural that erm ii entry and the preferred length of participation in the mechanism will differ across countries. in fact, three new member states, namely estonia, lithuania and slovenia, joined erm ii with effect from 28 june 2004, while others have not specified a date when they intend to join. another key principle is the principle of equal treatment. this means that comparable situations and cases will be treated in a comparable manner, both across countries and over time. with respect to the examination of nominal convergence in the ecb convergence report 2004, this implies that the same convergence criteria laid down in the treaty have been applied as was the case in the past. thus, no new criteria were added, while the existing criteria were not relaxed. the process of monetary integration with the euro area should be accompanied by overall consistent and stability - oriented economic policies. moreover, a stable macroeconomic environment and progress in structural and fiscal reforms are also essential to take full advantage of the benefits of eu enlargement. in my view, the most pressing challenges for the new member states are to maintain price stability and to advance with fiscal consolidation. with respect to price stability, the new member states will be confronted with the challenge to complete the disinflation process and / or to contain increases in inflation rates in a controlled fashion, without substantial adverse effects on inflation expectations and wage developments. besides solid macroeconomic policy frameworks and prudent wage policies, progress with structural reforms is conducive to price stability. with respect to fiscal consolidation, it is clear that this is a demanding challenge for most of the new member states, as they are confronted with competing expenditure demands. and it is the reason why policy - makers have to design and implement a credible consolidation path based on durable and growth - enhancing structural reforms. ladies and gentleman. it is time for me to close the third ecb central banking conference. we had very intensive and inspiring discussions. while there are still a number of open questions and issues, i am sure that we will all go home with some new thoughts and ideas in our minds. let me take the opportunity to thank the authors of the papers for their remarkable work. my thanks