independently of the local conditions to the risk of a higher level of unemployment. it is consequently of particular importance for all countries to achieve a high degree of wage flexibility in order to improve the ability of their labour markets to adjust to such shocks. secondly, national policies should aim at improving long - term growth prospects by, on the one hand, affecting positively labour utilisation and, on the other, improving labour productivity growth. structural policies can increase labour utilisation by addressing labour supply incentives that are inherent in tax and benefit systems. high average and marginal tax rates and high unemployment benefits impact negatively on the incentives to engage in paid employment or on the choice of the number of hours to work. early retirement policies also have a significant negative effect on labour supply and, hence, on the participation and employment rates. growth in labour productivity should be supported by policies that aim at promoting innovation and technological change. for that purpose, policies should focus on allowing the efficient functioning of entrepreneurial activities, removing for instance entry restrictions and improving labour market adaptability. speaking in front of elected representatives, i know that the successful implementation of structural reforms requires constant explanations and well targeted communication in order to convince the citizens about their beneficial effects on growth and job creations ; i fully understand the difficulty of this task and can only encourage all responsible parties in these communication efforts. conclusion i am fully aware that this is indeed a very demanding list of tasks. but this is in our view the only way ahead. there is indeed enormous work to be done by all of us. and i would like to stress “ by all of us ”. we have, the eurosystem, the european commission, the national governments, and the european and national parliaments, a shared responsibility in ensuring a smooth functioning of emu, by improving the integration and flexibility of its markets. some differences in economic performances across countries or regions have existed and will continue to exist in the future, as it is the case in the us and in other any areas. 317 millions d ’ europeens ont decide de partager aujourd ’ hui un destin en commun. la monnaie unique n ’ est pas seulement une formidable reussite et le symbole puissant de l ’ unite de l ’ europe dans un monde en voie de transformation rapide. la monnaie unique nous reunit plus profondement, plus intimement que le debat public europeen ne le suggere par

governments prevent discretionary policy measures from contributing pro - cyclically to the business cycle. structural reforms it is in the area of structural reforms where national policies can make the most significant contribution to facilitating the working of adjustment mechanisms in individual countries and to improving long - term growth and employment prospects as well as to addressing undesirable growth underperformance in some countries. in this regard, the lisbon process has raised the awareness among european countries that structural reforms are decisive for remaining competitive in an increasingly global economic environment. the integrated guidelines outlining reform and policy priorities as well as the setting - up of national reform programmes are suitable instruments to lead the way to a wellfunctioning internal market as well as to better functioning national markets. in this respect, we appreciate the inclusion of a special euro area fiche into the integrated guidelines, highlighting the particular reform necessities of countries that participate in the euro area. let me briefly elaborate in more detail on these important issues. first, the focus must be on structural reforms enhancing economic flexibility. this should help to better absorb shocks and thereby improve the working of adjustment mechanisms in individual countries. in the context of emu with a single monetary policy, the later the necessary national policy measures are taken to make the economies more flexible, the larger the potential costs can be in case of adverse shocks. how to enhance economic flexibility? there are many factors that may help to increase flexibility within the euro area. first, the single market needs to be completed in order to stimulate price flexibility by fostering competition and open product markets, e. g. in the services and network industries. this requires that existing barriers to labour and capital mobility within the euro area are removed. in this respect, measures aimed at protecting domestic industries or employees against competition are only counterproductive as they delay the necessary adjustment. now that slovenia has entered it the euro area, it is decisive that its labour force is granted full access to the labour markets of all euro area countries. as i have already stressed in several occasions, it is abnormal that there are labour restrictions as regards slovenian workers in a number of economies that are members of the euro area. economic flexibility can also be promoted by removing the institutional barriers to flexible price and wage setting mechanisms, in particular by easing product market regulations and employment protection legislation. specifically, as regards wage setting, nominal and real wages should adjust to help absorb shocks. wage setting must reflect firms ’ different situations rather than being defined homogenously across sectors or countries