area countries towards structural reforms. these reforms are necessary to maintain and strengthen the euro area ’ s growth potential over the long term and to increase the flexibility of the euro area economy to adjust smoothly to external shocks. while progress has been made, substantial further efforts are needed. i therefore warmly welcome the presidency conclusions of the brussels european council held on 26 march 2004, which underline that the pace of reform needs to be stepped up significantly. the evaluation of the ecb ’ s monetary policy strategy turning to specific issues raised in the ecb ’ s annual report 2003, let me briefly summarise the governing council ’ s comprehensive evaluation of the ecb ’ s monetary policy strategy, which was carried out in the first half of 2003. since 1999, the ecb ’ s monetary policy strategy, with its clear focus on the maintenance of price stability, has served to anchor long - term inflation expectations in the euro area at low levels. it has also provided both a solid basis for internal decision - making and a consistent framework for the presentation of policy decisions to the public. the strategy has been an indispensable tool in organising the analysis prepared for the governing council and in structuring the discussion within the council. the strategy has also provided a sound framework for the ecb ’ s overall accountability. following the detailed evaluation, the governing council confirmed the main elements of the strategy originally announced in 1998, namely its quantitative definition of price stability and the two - pillar structure underlying the overall assessment of risks to price stability. we continue to define price stability as a year - on - year increase of below 2 % in the harmonised index of consumer prices ( hicp ) for the euro area. at the same time, we clarified that in the pursuit of price stability the ecb aims to keep inflation rates below, but close to 2 % over the medium term. in addition, the governing council also confirmed that its monetary policy decisions would continue to be based on a comprehensive analysis of the risks to price stability, comprising an economic analysis and a monetary analysis. the economic analysis seeks to identify short to medium - term risks to price stability. the monetary analysis assesses medium to long - term trends in inflation, given the close relationship between money and prices over extended horizons. the governing council emphasised that the monetary analysis would serve mainly as a means of cross - checking, from a medium to longer - term perspective, the short to medium - term indications coming from the economic analysis. given the medium to long

, thread, etc. any failure of the vendors in this regard could result in total loss of business with individual countries making efforts to indigenize. 20. let me now focus your attention on some expectations that we have from the various vendors present in the banknote conference here. we all agree that the integrity of bis central bankers ’ speeches banknotes is the most important factor. in this context, it is also actually quite ironical that for the circulation of forged notes the blame is put on the central bank when, in fact, the blame should go to the manufacturer of the forged notes as in the case of spurious drugs, where the manufacturers are prosecuted. however, it is my considered opinion that the integrity of the banknotes is not a technology issue but more of a law and order issue. when i say this i feel i would be echoing the sentiments of all consumers of various products that the industry produces, especially the representatives of the emerging market countries, who rely heavily on imports for currency production in their respective jurisdictions. i firmly believe that upgrading the security and design features of the banknotes every few years to outsmart the counterfeiters is not a long - term solution but only adds to the cost of producing the banknotes. 21. let me elaborate what i mean. if the counterfeiters are able to do a good job of producing duplicate currency, they are obviously having access to good quality currency paper, printing ink and other components that are necessary for production of banknotes. so, the question is, what is the source of supply for the fraudsters and what is the role of vendors in perpetration of these unlawful activities. the commercial banks the world over follow stringent kyc procedures on their customers. as counterfeiting is a global issue, what i would like the vendors present here is to similarly do a proper customer identification / due diligence on all their customers. the vendors must join hands to find out who has supplied ink, paper, machinery, etc. to the counterfeiters which would enable the regulators to take appropriate action. in a manner the banks close accounts of customers doing any doubtful transactions ; the suppliers should be able to cut off their links with their doubtful customers. in fact, the need of the hour is that counterfeiting should be tackled as a criminal activity with active co - ordination and collective might of all stakeholders - the vendors, central banks, law enforcement agencies, etc. finding a long - term solution to this menace may