it makes sense for macroeconomic surveillance to have a clear focus on the euro area countries with large current account deficits, significant losses of competitiveness and high levels of public and private debt. as regards fiscal surveillance, ambitious benchmarks are needed when establishing an excessive deficit and in setting the adjustment path towards a country ’ s medium - term budgetary objective. such benchmarks need to be even more ambitious if a country ’ s debt exceeds the reference value of 60 % of gdp or there are fiscal sustainability risks. finally, the gap between the eu and national level must be closed. new procedures will not be sufficient if they are not solidly anchored at national level. binding commitments by member states to swiftly implement strong national budgetary frameworks are essential. major improvements are needed regarding the quality and independence of fiscal and economic analysis and the production of fiscal statistics. all these aspects should be contemplated as mandatory features in the foreseen directive on national fiscal frameworks. bis central bankers ’ speeches in the ecb ’ s view, the proposals meanwhile agreed do not go far enough. regarding the final result, we are encouraged by the fact that the european parliament has shown some ambition in its approach, particularly as regards greater automaticity and the broader and timelier use of sanctions. the room for halting or suspending procedures against those member states breaking the rules must be reduced. some other points of the parliament ’ s proposals also deserve a positive mention like the strengthening of the commission ’ s role in the procedures and an earlier and more gradual application of financial sanctions within the macroeconomic surveillance framework. it is also positive the support in the same framework for a clear distinction between member states belonging or not to the euro area. the requirements of avoiding negative imbalances must be more demanding for members of the monetary union. this type of distinction, making full use of the treaty ’ s new article 136, has to be applied in different domains, drawing the appropriate lessons of the crisis for the functioning of the monetary union. we hope that the ongoing negotiations over the legislative package will permit the texts to be significantly improved along these lines. the ecb is encouraged that the amendments proposed by the european parliament go in the direction of the significant strengthening of economic governance that we have called for. however, there are some important areas in which the texts should not be weakened. in particular, softening the stability and growth pact by introducing further exceptions or treating in a special way specific expenditure items, such as public investment, would create

seong - tae lee : monetary policy in an environment of low inflation opening address by mr seong - tae lee, governor and chairman of the bank of korea, at the bank of korea international conference 2006, seoul, 16 june 2006. * * * greetings ladies and gentlemen, i am delighted to be here to express my warm welcome to all of you attending " the bank of korea international conference 2006 ". i would like to extend particular gratitude to our keynote speaker, professor frederic mishkin of columbia university ; to our luncheon speaker, president un - chan jung of seoul national university ; to president william poole of the federal reserve bank of st. louis ; and to our other chairpersons, speakers and discussants, for taking time out from their busy schedules to be with us today. this year's conference, marking the 56th anniversary of the bank of korea's establishment, deals with the theme of " monetary policy in an environment of low inflation ". many central banks including the bank of korea are currently facing difficulties conducting monetary policy in the new environment characterized by low inflation. in this regard, i believe that today's conference is very meaningful and most timely. conducting monetary policy under low inflation as we are all aware, inflation throughout the world has declined since the mid - 1990s. this is mainly attributable to the emergence on the global stage of vast low - wage economies such as china and india ; to productivity gains made possible by information technology ( it ) development ; and to intensified competition in both domestic and global markets. in addition to all of these factors, the increased credibility of central banks is also believed to have contributed to low inflation. over the years, central banks around the world have been resolute in their pursuit of price stability, while working hard to enhance their capabilities in the conduct of monetary policy. together with the continuing price stability, this has helped lower the inflation expectations of economic agents. the case is much the same in korea. both consumer price and core inflation rates are running at levels some two percentage points lower than those we saw here prior to the currency crisis. particularly, the rate of core inflation nowadays is moving substantially below the lower bound of the bank of korea's target range. in the last few months, upward price movements have been observed in several countries. however, rising prices on a scale similar to those of the past are no longer expected to reappear for the time being, as firms continue their efforts to improve productivity with