useful to have a more gradual application of financial sanctions to provide clear incentives for appropriate macroeconomic policies. concluding remarks policy - makers in individual euro area countries have to come to terms with the realities of being part of a monetary union and adjust policies accordingly. this means pursuing sound and sustainable fiscal policies, preventing the build - up of macroeconomic imbalances and ensuring that the economy has the necessary shock - absorption capacity – and in particular flexibility – to ensure a smooth adjustment to country - specific developments. in that respect, ambitious and front - loaded structural reforms are essential. the eu 2020 strategy can play a useful role in that respect. of course, the ultimate responsibility for effective reform lies with national governments who have to ensure the economic flexibility and growth potential necessary to reap the full benefits of being a member of the euro area. some loss of sovereignty is part of the reality of sharing and benefiting from a common currency. if this is not acknowledged in time, it may imply an even larger loss of sovereignty at a later stage. the ecb considers it fundamental to set up an effective surveillance mechanism in the euro area in order to prevent challenges similar to those experienced currently by some euro area countries from re - emerging in the future. it is equally important that markets can play their disciplinary role in an efficient manner. this requires transparency in the surveillance process and the realisation of markets that the no - bail out clause does indeed constitute one of the binding constraints of emu. as in the past, the ecb will continue to deliver on its mandate and ensure price stability for the euro area over the medium term. this will provide an important anchor of stability to each individual euro area country, an anchor which is particularly valuable for those countries undergoing a difficult adjustment process. individual member states will benefit from this stability. at the same time, they have the responsibility to ensure the smooth functioning of the common currency area. this requires further efforts in all euro area countries to make sure that, in terms of monetary policy, one size does indeed fit all. bis central bankers ’ speeches

2 % this year to close to 3 % in both 2000 and 2001. consumer price increases, as measured by the harmonised index of consumer prices ( hicp ), have recently resumed their upward trend, as expected. in october the annual rate of change in the overall hicp was 1. 4 %, up from 1. 2 % in september and august owing to higher price increases for food and non - energy industrial goods. the impact of higher oil prices on energy prices in the hicp, which had accounted for most of the upward pressure since june 1999, was countered in october by more moderate increases in other energy components. some additional counterweight to the upward movement in goods prices came from a further moderation of increases in prices in the services sector. in general, the overall upward trend is expected to continue until early 2000 as a result of the increase in oil prices since spring 1999. forecasts available suggest that price increases will nevertheless remain below 2 % in the course of 2000 and 2001. however, the actual developments will very much depend on the behaviour of a number of factors, and in particular on wage developments remaining in line with price stability. in addition, our assessment has to take due account of prevailing uncertainties. on the upside, these relate to, inter alia, the behaviour of money and credit aggregates, the developments in oil prices and the path of the effective exchange rate, all of which are closely monitored with regard to their impact on price stability. on the downside, main factors are linked to the effects of deregulation and liberalisation. in conclusion, the current monetary policy stance should ensure a sustainable expansion of non - inflationary economic activity in the euro area. in line with its monetary policy strategy, the governing council will remain vigilant with regard to any risks to price stability arising either from domestic or from external sources and act in a timely manner. let me now give the floor to the vice - president to introduce some of the additional topics we discussed during our meetings. the governing council today also took a decision on the subject of the minimum reserve system. as you may be aware, interbank liabilities are not subject to reserve requirements. in this respect, the ecb allows those credit institutions which cannot provide evidence of their interbank liabilities - in the form of debt securities issued with an agreed maturity of up to two years or money market paper to apply a standardised deduction to the aforementioned liabilities in the computation of their reserve base.