by increasing the growth potential of the euro area. the growth potential of an economy, however, is determined by technological and structural factors. raising its growth potential is an important challenge that the euro area faces, achievement of which would spread its benefits throughout the world. while some reforms have already taken place, additional efforts are needed. ongoing comprehensive structural reforms of the labour and product markets remain essential in order to improve the functioning of markets in the euro area. responsibility for these reforms lies with the governments, and with the key national economic agents on the side of labour and industry. it is crucial to increase investment incentives through structural policy measures such as deregulation and privatisation. fiscal policy should continue along the path of diminishing adverse incentives provided by tax, benefit and pension systems, while reforms on the expenditure side of the budget are also needed for progress along the way towards the medium - term objective of attaining budgetary positions " close to balance or in surplus ". to sum up, although monetary policy cannot lift the euro area's growth potential, the benefits of price stability for growth are evident, as stable prices provide the proper environment for structural reforms to work. while the ecb will maintain its commitment to the maintenance of price stability, other policy - makers should assume responsibility for increasing the growth potential of the euro area. this, in turn, is the best allocation of responsibilities to contributing to sustainable non - inflationary growth in the euro area and, thereby, also at a global level.

an inefficient medium - term outcome characterised by higher inflation and lower growth. two main factors support this view. first, economic developments are surrounded by a great deal of uncertainty. this uncertainty affects the analysis of both the current state of the economy and its future course. and second, monetary policy operates with relatively long lags, having very little effect on the economy in the short run. past experience has shown that attempts to fine - tune the economy might place in jeopardy the commitment to maintain price stability in the medium term, as is essential for a wellfunctioning economy. once inflation exists and inflation expectations prevail in the economy, the economic costs of the subsequent necessary stabilisation far exceed whichever temporary benefits might have been previously obtained. therefore, the ecb needs to remain focused on the maintenance of price stability in the medium term. the ecb pursues this objective in a consistent and forward - looking manner, ensuring the confidence of all policy - makers, both within and outside the euro area. experience so far suggests that the ecb has been able to keep inflationary expectations at a low level. although current hicp figures in the euro area are adversely affected by energy and food prices, the current outlook is compatible with the maintenance of price stability in the medium term. this view is supported by the analysis of bond yields. it is comforting to see that market participants expect medium - term price developments to remain in line with the ecb's definition of price stability. currently available forecasts give rise to the expectation that inflation will again fall below 2 % in 2002. hence, we appear to be on the right track. however, we must not ignore existing risks to price stability. the governing council of the ecb therefore always stresses that it is vigilant and will take into account all new information that might affect the outlook for price stability in the medium term. let me now conclude by recalling that, while the ecb cannot be held accountable for growth in the euro area, interest rates in the euro area have been relatively low, and cannot, by any means, be considered to be an obstacle to growth. currently, although uncertainty remains high, the general expectation is that growth in the euro area will remain at, or slightly above, trend potential growth in the period ahead. having said that, the ecb would welcome an increase of the already substantial contribution of the euro area to global economic growth. however, this should be achieved in a lasting way,