in the euro area, monetary policy decisions are centralised from now on, but their implementation remains to a large extent decentralised. the governing council of the european central bank is the supreme decision - making body. it meets every fortnight and consists of the six permanent members of the board of the ecb and of the governors of every national central bank. it is the governing council which more in particular determines the level of official interest rates. in practice, decisions are taken on a consensus basis, but according to the legal provisions they require a simple majority of votes. each member has one vote : the vote of the governor of the national bank of belgium carries the same weight as the one of the president of the bundesbank, the governor of the central bank of luxembourg or the governor of the national bank of belgium. the principle ‘ one person, one vote ’ thus reflects the fact that even though they are originally from different countries of the euro area, the members of the governing council act completely independently and not as representatives of their country. the treaty specifically stipulates that they can neither ask for or receive instructions from their government or from anybody else and that they must take their decisions solely on the basis of the interests of the euro area as a whole. * * * in granting the decision makers of the european central bank a high degree of independence, the treaty of maastricht - and i think these two things go together - has also assigned them a specific task : i. e. to guarantee price stability. indeed, the treaty clearly states that this is the primary objective of european monetary policy and that, without prejudice to this stability, monetary policy contributes to the other objectives of economic policy. in every country in the world the population is, i think, of the opinion that the first duty of the central bank consists in maintaining the purchasing power of the currency it issues. but this mandate is particularly stringent for the euro area, as was the case previously for the bundesbank in germany. the people in europe, and moreover not only in germany, seem to be particularly attached to price stability. moreover, no central banker, and in any case not the members of the governing council of the ecb, is insensitive to growth and employment. but we think that growth should not be stimulated to the detriment of price stability, as such an action is short - lived and costly in the long term and monetary policy cannot resolve structural problems, in particular structural unemployment,

term structure of interest rates, indicators for budgetary policy, various standards for measuring real economic activity, and the results of surveys among producers and consumers. * * * if i make a short comparison between the monetary policy in the united states, canada and the euro area, i observe a great similarity between the bank of canada and the ecb : price stability is clearly the primary objective of their policy, whereas the mandate of the federal reserve is both wider and less specific. in your country quantifying the objective ( “ inflation target ” ) is subject to an agreement between the minister of finance and the central bank, whereas in the euro area, the central bank determines this autonomously. it is true that in the euro area we have twelve finance ministers! however the discretionary power of the fed is greater still. but apart from these few differences, our three central banks share the characteristics of the major modern central banks : price stability is considered as a necessary condition for sustainable growth ; they enjoy a high degree of independence in the conduct of monetary policy and simultaneously have a strong concern for transparency and accountability. * * * during the first three years of the euro ’ s existence, the european central bank has already been confronted with important and different challenges. at the start of the single monetary policy, in the beginning of 1999, its principal leading interest rate stood at a low level of 3 p. c. during the spring of that same year the ecb then has had to address a deflationary threat and lowered its rate to 2. 5 p. c. later on, primarily due to the steep rise in oil prices, but also of meat prices in europe inflationary risks appeared which the ecb has sought to contain by gradually raising its interest rate from 2. 5 % to 4. 75 % between november 1999 and october 2000. no central bank can avoid that a shock beyond its control, such as an oil shock, momentarily increases inflation. but the central bank has to prevent the increase of certain prices from transforming into an upward spiral of all prices and costs. the european central bank has succeeded in doing so. euro area inflation reached a maximum of 3. 4 p. c. at the beginning of the summer of this year ; since then it has been declining and should according to all expectations drop below 2 p. c. in the coming months. the reduction of inflationary pressures has allowed the european central bank to reduce its interest rates since the spring by 150 basis points in four moves ( coming