area was inflation. through a gradual stabilisation of the exchange rate, disinflationary interest rate and fiscal policies, and the abandonment of wage and contract indexation, we managed to bring inflation down from almost 10 % in 2000 to just above 2 % in 2006. interest rates had also fallen substantially. this brings us to the second important point. conditions for borrowing of government and banks on international markets and credit conditions for business and households have improved significantly. we could observe something similar in croatia in previous years. these favourable developments also bring risks. better access to international financial markets has contributed to a strong credit expansion in slovenia, which was also supported by the strong growth of domestic construction sector, financing of corporate acquisitions and global economic upturn. following the global financial crisis and the drying up of liquidity in the interbank market, our banking system found itself in difficulties. the circumstances surrounding croatia's adoption of the euro are also a challenge of their own. however, bank regulation and supervision have been substantially upgraded in the last decade. macro - prudential policy tools are also more developed these days. ( iii ) the third important issue is the macroeconomic effects of the euro. given the proximity of eu accession and the adoption of the euro in slovenia, the effects of these two events are intertwined. that period of euro adoption was marked also by a strong global economic upturn, which was reflected in rising prices. croatia's adoption of the euro took place in an economically and geopolitically turbulent environment, at a time of the highest inflation in advanced economies in the last four decades. the confluence of different factors complicates the assessment of the impacts of euro adoption. 2 / 3 bis - central bankers'speeches in generally, adoption of the euro by a small economy brings higher price transparency and competition, lowers transaction and borrowing costs, reduces currency risks and makes it easier for domestic firms to do business in foreign markets. in both countries, the introduction of the euro was accompanied by concerns about price increases. analysis for slovenia shows that consumer prices increased by around 0. 3 percentage points in the first months after the introduction of the euro. price rounding was an important contributing factor. this may not be consistent with people's perception. a marked increase in the prices of goods with a lower nominal value that we consume on a daily basis can give the impression of an overall price increase. the so - called » espresso effect « has also been observed in croatia in

to pursue fiscal activism. it remains essential that both the commitments made in the stability programmes and the requests to further improve fiscal positions, as subsequently agreed in the ecofin council, are implemented in full. this will help to build confidence in the fiscal framework and anchor expectations about the future macroeconomic environment. in a highly uncertain environment, it is all the more essential that governments help to boost investor and consumer confidence by taking decisive action to implement structural reforms in labour and product markets and in public finance. on the one hand, there appears to be a broad consensus among policymakers and the public that such reforms are important to ultimately raise the euro area ’ s production potential, improve the flexibility of the economy and make the euro area more resilient to external shocks. on the other hand, notwithstanding some progress in individual countries, the effective pace of reform has so far remained slow and clearly insufficient to meet the lisbon objectives. over the past few years this has given rise to an implementation gap. efforts to overcome structural inefficiencies in the functioning of markets must be stepped up. this would promote confidence in the medium - term production capacity of the euro area and therefore counteract to some extent the current high degree of uncertainty. we are now at your disposal for questions.