seen a significant upturn in long - term interest rates in the euro area since the end of may. this development was certainly affected by the continued increase in bond yields in the united states over the same period. more recently, however, domestic factors have probably played a more important role in the determination of domestic bond yields than was previously the case. these factors include financial market perceptions of more evidence pointing to a further strengthening in economic activity in the euro area during the year, accompanied by a modest pick - up in inflation expectations from the low levels seen in recent months. the more positive market sentiment regarding the prospects for euro area output growth has also been reflected in a narrowing over recent weeks of the relatively wide differentials between us and euro area bond yields. exchange rate developments do not yet reflect these very same factors. as we have said on earlier occasions, the governing council believes that the euro is firmly based on internal price stability and therefore, has the clear potential to achieve a stronger external value. the governing council reaffirmed its view at today ’ s meeting that the monetary policy of the eurosystem will safeguard the euro ’ s internal purchasing power and will thereby support its international value. the prospects for a more broadly based and sustained recovery in the world economy have become stronger. the outlook has improved further, in particular in relation to expectations of continuously strong growth in the us economy and some tentative indications that the prolonged decline in activity in japan may have come to a halt. in addition, recent developments in economic and financial indicators for the emerging market economies suggest that a recovery is under way in south - east asia. moreover, to the extent that the kosovo conflict may have had a negative impact on economic sentiment in a number of countries, its end has eliminated a risk to the outlook for economic developments in the euro area. as recent developments in latin america indicate the outlook has improved only moderately. with reference to developments in economic activity in the euro area, some important data have been released since our last meeting. most notably, eurostat has now started to publish euro area national accounts data which are based more closely on data compiled in accordance with the new esa 95 methodology. according to these estimates, the quarter - on - quarter rate of real gdp growth increased to 0. 5 % in the first quarter of this year, compared with 0. 3 % in the previous quarter. at present there is insufficient experience with regard to the properties of the new esa 95 data, in particular their susceptibility to revision

early 1999, the expectation of a strengthening in economic activity in the course of 1999 and a further acceleration next year all indicate that any upward pressures on prices will have to be monitored very carefully. let me now give the floor to the vice - president to introduce two additional topics we discussed during the governing council meeting : in addition to reviewing the main monetary, financial and other economic indicators, the governing council also considered the days on which the target system would be closed in the year 2000. with regard to the calendar of target operating days for 1999, the ecb announced on 31 march 1999 that the target system would close on 31 december 1999, in addition to saturdays and sundays, christmas day and new year ’ s day. however, considering the financial and social cost of keeping the target system open on days which are traditionally public holidays ( or bank holidays ) in most of the euro area, and in view of the indication given by the european banking industry that it would welcome the closing of target on such days, the governing council today decided in principle that next year – in addition to saturdays and sundays – target will be closed on new year ’ s day, good friday, easter monday, 1 may ( labour day ), christmas day and 26 december. in countries where one of these days is not a public holiday, the national central bank will endeavour to close the national rtgs system on the day in question or, when this is not possible, will seek to limit domestic payment activity as much as possible. you will find further information relating to this decision in the separate press release to be issued today. last and certainly not least, it is my great pleasure to announce a very important milestone along the road to the introduction of the euro banknotes. the production of the euro banknotes has begun and, by the end of this month, euro banknote production will be under way in printing works in several euro area countries. as you will remember, we presented the draft euro banknote designs in december 1996. the designs were subsequently adjusted and refined in order to meet the technical specifications in full. intensive work then began to convert the detailed designs into the origination material, in other words the final dies, films and plates which enable printing plates to be made. production of the pilot series started in september 1998 and was completed a few months ago. the printing of this pilot series involved the production of several million banknotes under normal operating conditions. this was a success and we therefore agreed that the participating national central banks could