##ilateral commitment, while others aim to maintain the exchange rate much very close to the central parity. at the moment, however, none of the new member states has been participating in erm ii for the required minimum of two years. another challenge that might lie ahead for a number of the new member states relates to their substantial and persistent current account imbalances. although external imbalances are to some extent a natural and necessary part of the catching - up process, care needs to be taken to ensure that these imbalances remain sustainable and eventually decline. even though the balance of payments appears to be less relevant once a country has joined the monetary union, economic adjustments in response to such imbalances will take place at some point in the future. in this respect, it is possible that the current account deficit might “ naturally ” narrow over time as the cyclical position in the country becomes more aligned with that of the euro area countries. however, if economic policy and market structures do not facilitate the adjustment process, it is also possible that the adjustment of the economy will be abrupt and severe – another reason to emphasise real convergence and the flexibility of economic structures, as i outlined before. finally, where do we stand with regard to the fulfilment of the fiscal criteria? looking at recent fiscal developments in the new member states, the picture is very diverse ( see slides 7 and 8 ). thee two charts show the fiscal positions in the new member states and the reference values as defined in the treaty. while many of the new eu members face no major problems on that front, others exhibit large and even growing fiscal imbalances. in addressing the fiscal policy challenges faced by these countries, one aspect deserves, in my opinion, particular attention : namely that the appropriateness of the budgetary stance cannot only be judged with reference to the fulfilment of the fiscal criteria. as i pointed out earlier, fiscal policy will have to be employed as a policy instrument to help contain inflationary pressures, when other policies ( such as monetary policy ) are increasingly constrained in the run - up to euro area accession. this is especially the case in the final phase of convergence and erm ii participation, when the convergence not only of long - term interest rates, but also of short - term interest rates progressively limits the room for manoeuvre for monetary policy. moreover, as buoyant economic growth in these countries is often supported by very high credit growth, effective financial supervision

adjustments in economic structures and market institutions – can support the sustainability of nominal convergence, for example by improving competition in product markets, increasing labour market flexibility and reducing the likelihood and impact of asymmetric shocks. the experience of a number of the current euro area countries over the past few years underscores the importance of structural and institutional adjustments – that is, of real convergence to the norms of market competition and flexibility, for sustaining a high degree of price stability, maintaining competitiveness and supporting higher and durable growth. before coming to policy issues related to the fulfilment of the individual convergence criteria, i would like to briefly address two other general issues that i regard to be crucial for the examination of the economic convergence process : the reliability of the statistical base and the legal framework for central banks. the assessment of economic convergence is highly dependent on the quality and integrity of the underlying statistics supplied by the countries concerned. the ecb, therefore, has repeatedly emphasised that members states should consider the quality and integrity of their statistics as a matter of priority. to achieve the high standards required in the domain of statistics, it would be useful to reinforce the independence, integrity and accountability of national statistical institutes. the treaty also requires the examination of “ legal convergence ”, i. e. the compatibility of national legislation with articles 108 and 109 of the treaty and with the statute of the escb. the conditions for euro area entry in the legal domain refer, in particular, to central bank independence, the prohibition of monetary financing and privileged access to credit, and the integration of the national central bank of the country concerned into the eurosystem. in this context, i should like to emphasise that central bank independence comprises various aspects, notably functional, institutional, personal and financial independence. unfortunately, we have had to point out on a number of occasions in the recent past that all of these aspects of independence need to be respected, not only in principle, as a formality that can be satisfied by aligning national legislation, but also in practice. independence is important both for the effective performance of a national central bank ’ s tasks and for its participation in the eurosystem. iii. policy challenges pertaining to individual convergence criteria let me conclude by commenting on some policy challenges that the new member states may face on the road to the euro and in fulfilling the convergence criteria. i will start with the inflation criterion. where do the new member states stand in terms of inflation convergence? looking back, these countries have generally made