entries continue to rise gradually ; and the composite state - of - the - economy index for the first few months of the year was retroactively revised upwards last week by the bank of israel. hence, the picture that emerges regarding economic activity in the first few months of the year does not justify changing the bank of israel's forecast of 4 percent growth for 2005. this situation of a growing economy with economic and financial stability did not come about by chance. it is the result of a correct macroeconomic policy, in particular of monetary policy that focuses on stability, and without jeopardizing it, helps growth, combined with fiscal policy that operates within the framework of long - term fiscal discipline alongside structural reforms that support growth. as far as fiscal policy is concerned, i am in favor of the ministry of finance program to reduce taxes ; care must be taken to ensure that during its implementation special attention is paid to the welfare aspects of the program, and that the government debt and its high share in gdp continue along their downward path. i would like to turn now to two important issues facing us, and which the finance committee will also have to deal with : the recommendations of the bachar committee, and the bank of israel law. with regard to the bachar committee, i would like to make it perfectly clear that i support the proposed reform of the capital market along the lines recommended by the committee. the high degree of concentration in the capital market has an adverse effect on economic growth and efficiency. it is very difficult to pursue a policy of economic reforms without dealing with this issue in a thorough and comprehensive manner. the proposals of the bachar committee offer a good solution to the problems of concentration afflicting israel's capital market. most of the credit market is in the hands of the banks, and although nonbank credit has been expanding recently, the rate at which this is happening still leaves the bulk of credit within the banking system. there are certain detailed aspects of the reform that are still being addressed. but the question to be asked is whether after the reform the situation in the capital market will be better than before. if the answer is " yes, " then we must go ahead and implement it. in this case my answer is a definite " yes. " the second vital issue, and to the bank of israel this is the first issue, is the bank of israel law. i would like to state at the outset that despite the fact that the bank has been operating for 50 years

own and they do not represent the official position of the national bank of poland. second, my economic background allows me to speak in terms of standard economic variables : output, consumption, prices etc. on the other hand, i do not feel competent to speak about highly immeasurable values like national pride. notwithstanding the fact that people might derive utility from the pure fact of having in their wallets banknotes with polish kings instead of european bridges, i have no idea how to measure this utility and how to compare it to the utility derived from more standard arguments of preference functions like consumption. for this reason i will speak in terms of standard macroeconomic variables, bearing in mind that this is certainly not the whole story. if economists speak about the advantages and disadvantages of joining a common currency area, they ultimately end up comparing the costs and benefits of accession. this is also the way i would like to proceed. however, bearing in mind that many issues have already been described in several voluminous reports ( nbp 2004 for poland, csajbok, csemerly 2002 for hungary, hm treasury 2003 for the uk ), i will try to focus on issues which are less familiar to the general public or which are potential risk factors. the nature of these issues is that they are mainly concentrated on the cost side of the analysis. thus, it might seem from my lecture, that i mainly care about the costs or that costs outweigh benefits. let me, in the very beginning, stress that this is by no means the case. as stated by the president of the national bank of poland, mr sławomir skrzypek, an in - depth assessment of the costs and benefits of the euro adoption in poland needs to be periodically repeated in order to make sure that we take into account all important factors of the fast changing global economy. the national bank of poland is willing to play a key role in stimulating the public debate about the costs and benefits of the euro adoption. today ’ s conference is a good moment to contribute to this debate, and i would like to thank the organizers for offering this opportunity. let me begin with the benefit side. economists typically concentrate on the following sources of economic benefits related to monetary union. these are : • lower transaction costs, • lower interest rates, • financial integration, • trade creation. elimination of transaction costs incurred by companies and households in relation to the zloty / euro exchange rate is among the most obvious benefits of the