information on activity in the third quarter – coming from various confidence surveys and indicatorbased estimates – continues to support the assessment that economic activity will grow robustly while possibly moderating somewhat. looking ahead to the remainder of 2006 and 2007, the conditions remain in place for the euro area economy to grow at solid rates around potential, with some volatility in the quarterly growth rates likely to emerge around the turn of the year. global economic activity has become more balanced across regions and is still robust, thereby providing ongoing support for euro area exports. investment is expected to remain strong, benefiting from an extended period of very favourable financing conditions, balance sheet restructuring, accumulated and ongoing strong earnings, and gains in business efficiency. consumption growth in the euro area should also strengthen further over time, in line with developments in real disposable income, as employment conditions continue to improve. risks to the outlook for economic growth are broadly balanced over the shorter term, although the recent fall in oil prices – if it were to prove lasting – has the potential to lead to somewhat stronger demand and output growth than embodied in our baseline scenario for activity in the coming quarters. over the longer term, risks to growth lie on balance on the downside, and relate mainly to the possibility of a renewed increase in oil prices, fears of a rise in protectionist pressures, especially after the suspension of the doha round of trade talks, and possible disorderly developments owing to global imbalances. as regards price developments, according to eurostat ’ s flash estimate, annual hicp inflation fell to 1. 8 % in september 2006, from 2. 3 % in august. although no detailed breakdown is available as yet, this relatively sharp decline seems to be the combined result of favourable base effects, given in particular the strong rise in oil prices a year ago, and the recent significant fall in oil prices. while the outlook for energy prices is uncertain, on the basis of current energy prices and the higher quotations on futures markets, overall inflation rates are likely to increase again towards the end of the year and in early 2007. as a consequence, we expect a considerable degree of short - term volatility in the annual hicp inflation rate, while the overall inflation rate will remain elevated at levels above 2 % on average in 2006 and is likely to remain so in 2007. in addition, risks to the outlook for price developments remain clearly on the upside. they continue to include a stronger pass - through of past oil price rises into

. in the current favourable economic environment, it is essential that adequate headway be made towards sound public finances, implying that budget targets for 2007 should generally be more ambitious than in previous programmes. countries in excessive deficit need to remain fully committed to bringing their deficits to below 3 % within the agreed deadline via adequate and credible structural consolidation. other countries need to make clear progress towards their medium - term objectives in line with the requirements of the stability and growth pact. in all cases, any revenue windfalls from faster than expected growth should be used to speed up deficit reduction or to increase surpluses. pro - cyclical policies should be avoided and expenditure restraint is of particular importance, also given the high spending ratios and taxes as compared with many other industrialised countries. experience has shown that expenditure reform is key to successful consolidation, and consolidation is essential for reducing overall public debt and for making public finances less vulnerable to the impact of ageing populations. fiscal consolidation is likely to be most successful when coupled with comprehensive structural reforms. these are urgently needed to help to cushion the unfavourable economic effects of the projected demographic change in the euro area. the decline in the working age population will place further pressure on pension and health care systems, and may have wide - ranging economic consequences. in order to support the potential economic growth of the euro area, to foster macroeconomic flexibility and dynamism, and to safeguard the future standard of living of our citizens, labour and product market reforms are urgently needed. this will increase labour market participation and employment and strengthen innovation and the other forces driving productivity and economic growth. the ecb will play its part by continuing to maintain price stability over the medium term. we are now at your disposal for questions.