to 0. 8 %, compared with 0. 9 % in november and 1. 0 % in october. this development was in line with previous trends ; i. e. it was due mainly to a further reduction in energy prices and also, in december, to a decline in the price increases in non - energy industrial goods. taking a forward - looking perspective, the general environment continues to suggest that there are no significant upward or downward pressures on prices in the short term. furthermore, the pattern of risks to price stability has remained broadly unchanged. on the one hand, downward risks could materialise if import or producer prices were to fall further. on the other, given current wage demands, wage developments, especially when measured in real terms, could become a matter of concern and fiscal policies would also pose a threat to the favourable outlook for prices and growth and employment prospects, if the credibility of the stability and growth pact were undermined. in addition, exchange rate trends need to be monitored closely given their importance for domestic price developments. in conclusion, taking into account the latest evidence available, the governing council has not altered its assessment of the outlook for price developments. the governing council therefore decided to keep ecb interest rates unchanged at the levels currently prevailing. i should like to take this opportunity to recall that real three - month interest rates, if measured as nominal rates corrected for current hicp inflation ( as a very incomplete proxy ), stood at a level of 2. 3 % in january ; this is approximately 80 basis points lower than the level one year ago. at the same time, real long - term interest rates, measured on a similar basis, have reached a level of 3. 0 %, which is around 110 basis points lower than in early 1998. these levels are very low, both in comparison with other countries and with historical data for the euro area. monetary and financial conditions therefore support continued economic growth in the euro area in line with price stability. i should now like to inform you about some other matters considered by the governing council. the end - of - day procedures relating to target and access to the eurosystem ’ s standing facilities were reviewed by governing council today. the governing council agreed that from tomorrow on the deadline for requesting access to the marginal lending facility will coincide with the deadline for access to the deposit facility, i. e. 30 minutes after the actual closing time of target. furthermore, the deadlines for requesting access to the eurosystem ’ s standing – 3 –

##ly increased supply of products from emerging markets may induce a reorganisation of production in euro area countries. this strengthens the need for occupational mobility and the capacity to also absorb low - skilled labour in new sectors. the restructuring of the economy may lead to an at least temporary decrease in productivity, which would be more protracted the ‘ stickier ’ the economy and less able to overhaul traditional production structures. this may imply that those countries where the pace of reforms has been slow may find themselves, paradoxically, in a worse position than in the past. economies with uncompetitive product markets and rigid labour markets not only fail to adjust to technological change, but are also more vulnerable to shocks associated with the globalisation process. concluding remarks i would like to conclude by saying that europe is reforming its economy so as to adapt to the challenges of globalisation, technological change and ageing. considerable progress has been achieved, as reflected in the significant rise in employment growth. now the challenge is to also raise the level of productivity growth in all euro area countries. if this challenge is not met, it is hard to imagine that europe will be able to achieve a higher growth path and to keep the wealth of its citizens. monetary union has been effective – and very successful – in supporting growth through a credible monetary policy which creates a stable macroeconomic environment and has lowered financing costs for a number of euro area countries through a reduction of risk premia. emu, moreover, gives impetus to european integration, particularly in financial markets, and to a further reduction of the barriers to competition. the lisbon process now provides the tools to address the challenge of fully reversing the previous slowdown through further structural reforms. it will require the firm commitment of governments, entrepreneurs and workers to be successful and meet this challenge. i am still highly optimistic that we will succeed. annex table 1. euro area labour productivity growth ( annual % changes unless otherwise stated ) note : labour productivity is measured as value added over total employment. source : eurostat. table 2. contributions to labour productivity growth notes : lp growth stands for labour productivity growth per hour worked ; tfp stands for total factor productivity. sources : ecb calculations using euklems data. table 3. euro area labour productivity growth and contributions ( annual average rates, in % )