##en economic activity, thereby adding to the forces which had already depressed the outlook for the euro area before the escalation of tensions in the middle east. as a result, we should only expect a modest rate of economic growth for 2003. however, the evolution of economic growth for the rest of this year is particularly difficult to foresee at the moment, given the exceptional degree of uncertainty arising from the military conflict. our baseline scenario continues to be one of a moderate recovery associated with diminishing uncertainty, starting in the second half of 2003. however, we will need to review the economic implications of the war as soon as a clearer picture emerges. a number of scenarios, implying widely different outcomes for economic activity, are conceivable at present. yet it would be premature to assign specific probabilities to any such exercises, which are mainly of an illustrative nature. looking at price developments, annual hicp inflation is estimated by eurostat to have been 2. 4 % in march 2003, unchanged from february. the recent drop in oil prices is not likely to be reflected in the price statistics until april. as for the outlook for price stability over the medium term, it is particularly important to clearly distinguish between short - term volatility and more fundamental factors. while oil price developments may very much influence the pattern of inflation rates over the coming months, other factors should dominate beyond the short term. the lagged effects of the appreciation of the euro exchange rate since mid - 2002 will continue to dampen upward pressure on prices, as will the modest economic growth. if the recent significant reduction in oil prices is sustained, inflation rates will in all likelihood fall below 2 % in the course of 2003 and remain in line with price stability thereafter ; evidently, this presupposes that wage moderation prevails. overall, the present policy stance is consistent with the preservation of price stability over the medium term. it maintains a monetary environment that is in itself favourable to economic growth in a situation in which other factors are having an adverse effect on economic activity. exceptional circumstances are complicating the assessment of economic trends. we will therefore continue to monitor events carefully and evaluate them in the light of our mandate. regarding fiscal policies, the stability and growth pact provides a robust and flexible framework for addressing any strains on public finances without undermining the principle of budgetary discipline. while letting, where possible, automatic stabilisers operate in reaction to changing economic circumstances, there is no reason

a comprehensive description of the new tender procedure will be issued during the course of next week. turning to today ’ s other meeting, the general council considered public finance developments in the eu. the general council also carried out its first annual review of the functioning of the erm ii, in accordance with article 16 of the erm ii agreement. finally, let me draw your attention to the calendar for meetings of the governing council and general council in 2001. a separate press release listing the dates as well as the related dates for the press conferences will be made available to you this afternoon. in this context, i should also like to point out that the press conference previously announced for 3 august 2000 has been cancelled.