’ s labour market to improve its functioning and on strengthening further the business environment in order to enhance productivity growth. with such policies, slovakia should be well positioned for a long term continued successful economic performance. ladies and gentlemen, let me congratulate you on all the achievements made on the way towards the introduction of the euro in your country, and extend my warmest welcome to narodna banka slovenska as the new member of the eurosystem family. welcome slovakia!

labour and product markets. structural reforms in various regions of the world let me now turn to the issue of future challenges with respect to microeconomic policies and structural reforms in particular economic areas. i shall start with structural reforms in the euro area, and then move on to say a few words about structural reform in the eu neighbouring regions, the united states, latin america and, finally, east asia. euro area economic activity in the euro area remained subdued in the first half of 2003. however, there is increasing reason to expect that it will recover gradually in the second half of 2003 and strengthen further in 2004. although the outlook for price stability is favourable, having allowed interest rates to fall to historically low levels, monetary policy cannot by itself generate lasting and sustainable growth and employment in the euro area. part of the weakness in economic growth in the euro area may be linked to a lack of ambition in recent years in both fiscal and structural reforms to improve the conditions for investment and employment in the euro area. the euro area needs structural reforms which increase the flexibility of labour, financial and product markets and effectively increase potential output growth, job creation and investment. although the extent and implementation of labour market reforms have been uneven across countries, the efforts made in the 1990s resulted in positive progress in two areas : first, in fostering employment growth across most sectors, which rose to 1. 5 % per year on average between 1997 and 2001, and second, in helping groups, such as women, the young and old and the least educated, to enter the labour market. labour market reforms should now focus on reducing high structural unemployment and increasing participation and employment rates. indeed, it is important that, alongside social considerations, the countries of the euro area give more weight to economic efficiency within labour markets. capital market reforms can also play a major role in making the euro area economy more flexible. much has been achieved, not least due to the introduction of the euro, and the bulk of the financial services action plan has been implemented. however, the further integration of national capital markets towards a truly european financial market would be an important step towards safeguarding markets against country - specific shocks. finally, greater efforts must be made to remove existing barriers in product markets. since the early 1990s state enterprises have undergone extensive privatisation, the use of state aid has fallen and market entry barriers have been lowered, although not evenly across all countries or sectors. in addition, there are still significant barriers to the further removal of price pressures, and