. consequently, the portfolio shifts that have affected m3 growth over the past two years should unwind over time. finally, the perspective that economic activity will remain moderate reduces the likelihood of excess liquidity giving rise to increased spending. nevertheless, one has to bear in mind that monetary growth is also supported by the low level of interest rates. therefore, monetary developments need to be closely monitored with respect to their implications for price stability over the medium to long term. summing up our economic analysis, it currently appears that inflation rates should decline to below 2 % over the medium term, following recent movements in the exchange rate of the euro and given the sluggish growth performance of the euro area. our monetary analysis indicates that the strong expansion of m3 should not for the time being adversely affect this outlook. hence, cross - checking the information from the two pillars leads us to conclude that the outlook for price stability over the medium term has become more favourable. let me at this point comment on the debate about the hypothetical risk of deflation. as far as the euro area is concerned, it should be recalled that inflation has been hovering around 2 % for quite some time and that there are currently no forecasts indicating any deflationary risks. the ecb's monetary policy aims at inflation of below but close to 2 % over the medium term. in this respect, inflation expectations should remain well anchored at this level, irrespective of shorter - term developments in prices. at the regional level, a period of relatively low price increases or even price level declines will improve a region's competitiveness within the currency area. within a monetary union, deflation is not a meaningful concept when applied to individual regions. at this juncture, it may be particularly warranted to stress that monetary policy cannot by itself generate lasting and sustainable growth and employment in the euro area. this can only be achieved by appropriate structural measures that address fundamental weaknesses and tackle urgent adjustment requirements. in this respect, fiscal policies have a great potential for fostering confidence and thereby supporting activity, even in the short run. establishing a well designed medium - term consolidation strategy in those countries currently struggling with increasing fiscal imbalances would make a major contribution in this direction. this would imply comprehensive and growth - friendly measures including, in particular, a courageous reform of the structure and level of public expenditure. curbing spending growth would eventually also create further room for manoeuvre to address future pressure arising from pension systems and scope for future

world bank. for us europeans it also means uniting even more so as to take into account the existence of these new economic giants. what i would say to young people is : take a look at the many good reasons that we have for uniting europe ; together we can respond far more effectively to tomorrow ’ s challenges. question : your term of office as ecb president ends in october. what has been your most significant or most cherished experience in the course of these eight years? trichet : as president of such an organisation, you are constantly facing new challenges. from the start there was a tremendous team spirit throughout the ecb, even in the most difficult situations. it is gratifying to note that we do not function simply as an institution, but as true europeans who are deeply attached to the historic construction that is the european union. question : what significance does the charlemagne prize have? trichet : everyone at the ecb is moved and impressed that we – especially in today ’ s challenging circumstances – are being awarded this prize. i know all about the prize and have attended in the past. it is a very moving and impressive celebration. we were just talking about europe ’ s roots. in aachen, we are at the very roots of europe. bis central bankers ’ speeches question : how well do you know aachen? trichet : i have been to aachen several times. i am familiar with the big historic buildings, and of course with charlemagne. at the age of ten i won a prize in a school competition : a medal, struck with a portrait of charlemagne. a german emperor, a french emperor – it makes no difference. bis central bankers ’ speeches