continue benefiting from favourable financing conditions, corporate balance sheet restructuring, and improvements in earnings and business efficiency. consumption growth should continue to strengthen gradually over time, in line with developments in employment growth and hence real disposable income. this generally favourable outlook for economic activity in the euro area is also reflected in forecasts by international organisations and private sector institutions. risks to the outlook for economic growth are broadly balanced over the shorter term, although recent geopolitical tensions and their impact on markets are a timely reminder of the uncertainties that we face. medium to longer - term risks lie on the downside and relate in particular to the potential for further oil price rises, a disorderly unwinding of global imbalances and protectionist pressures, especially after the suspension of the doha round of trade talks. turning to price developments, according to eurostat ’ s flash estimate, annual hicp inflation was 2. 5 % in july 2006, unchanged from june and may. in the second half of 2006 and on average in 2007, inflation rates are likely to remain above 2 %, the precise levels depending very much on future energy price developments. while the moderate evolution of labour costs in the euro area is expected to continue in 2007 – also reflecting ongoing global competitive pressures, particularly in the manufacturing sector – indirect effects of past oil price increases and already announced changes in indirect taxes are expected to exert a significant upward effect on inflation in the course of next year. against this background, it is crucial that the social partners continue to meet their responsibilities. risks to the outlook for price developments have augmented and include further increases in oil prices, a stronger pass - through of past oil price rises into consumer prices than currently anticipated, additional increases in administered prices and indirect taxes, and – more fundamentally – stronger than expected wage and price developments owing to second - round effects of past oil price increases at a time of gradually improving labour markets. regarding prospects for inflation over medium to longer horizons, our assessment that upside risks to price stability prevail is confirmed by the monetary analysis. while the data for june 2006 show some moderation in the annual growth rate of m3, these latest developments remain consistent with a persistent upward trend in the underlying rate of monetary expansion since mid - 2004. the stimulative impact of the low level of interest rates in the euro area has been an important factor behind the tendency for money and credit growth to strengthen over recent quarters. looking at the counterparts of m3, the expansion of credit to

as regards structural reforms, it is essential, for europe ’ s future, to ensure that it has a fully operational internal market, allowing a free flow of labour and capital and free trade in goods and services. removing the remaining barriers within the eu will be a powerful means to promote the efficient allocation of factors of production as well as deeper economic and financial integration. this in turn would allow the eu to realise its substantial potential for stronger output and employment growth and to increase its resilience to shocks. exploiting the opportunities of the single market will help to safeguard the prosperity of the citizens of europe. for those member states which have fulfilled the convergence criteria laid down by the treaty and participate in the euro area, the considerable benefits of the internal market are further enhanced by the single currency, which offers them a credible framework for monetary policy and price stability in an environment characterised by the absence of exchange rate uncertainty within the euro area, low long - term interest rates, price and cost transparency, reduced transaction and information costs and stronger insurance against economic and financial instability. in this respect, the further enlargement of the euro area on 1 january 2007 with the entry of slovenia will be a new historical landmark. in order to fully reap the advantages of the euro and to allow adjustment mechanisms to operate efficiently within the enlarged currency area, it will be necessary to fully integrate slovenia into economic and monetary union, which calls for all remaining barriers to be removed, including those related to labour mobility. indeed, open, competitive and flexible markets are of particular importance for the functioning of the euro area economy and the smooth conduct of the single monetary policy. for its part, the governing council has undertaken all the necessary preparations to make banka slovenije an integral part of the eurosystem. we are now at your disposal for questions.