the exchange rate mechanism of the eu, for at least two years, and third, after the sustainable fulfilment of all the convergence criteria laid down in the treaty, the new member states will adopt the euro. throughout the process leading to the introduction of the euro, the new member states'economic situations and their policy strategies will have to be assessed on a case - by - case basis. the role of erm ii in this process, first, is to help participating member states orient their policies to stability and to foster economic convergence. second, participation in erm ii without severe tensions for at least two years is one of the convergence criteria. finally, entry into the euro area will be based on the sustainable fulfilment of the maastricht convergence criteria. these criteria will be applied to future euro area entrants in the same way they applied to euro area countries. it may take quite a while before new member states will be in a position to fully participate in emu. a fair share of realism is called for to avoid disappointment. in the long run, such an equitable and strict procedure will be to the advantage of all member states of the european union. in concluding, i would like to reiterate that in many respects, the euro has proved to be a driving force for europe's continued political integration and economic reforms. the euro is regarded as an important token of identity for a modern, dynamic and open europe. the euro provides a stable anchor in unfortunately not so stable times. but the euro can only shield us from external shocks within limits. even though the euro has already triggered considerable fiscal and structural reforms, we must not relinquish our endeavors to make the euro area economy more efficient and productive.

. the euro area economy is held back not only by current geopolitical tensions, but also by frictions in labor and product markets. structural reforms in these areas are of utmost importance to increase the flexibility of the economy, thereby improving its resilience against detrimental shocks and raising the euro area's noninflationary growth potential. policymakers are well aware of this assessment. however, the lack of clear and decisive progress in implementing structural reforms weighs on confidence. it is high time to reassure business, investors and consumers by delivering overdue structural reforms. such measures must be geared towards more flexible labor markets and higher labor participation rates, the full implementation of the eu single market, free and sound competition along with further cutbacks in state aid, and consumer - friendly retail market regulations. this would enhance productivity, thereby making the euro area more attractive for domestic and international investment, it would promote economic activity and raise the noninflationary growth potential of the euro area, and it would enhance employment, thus boosting consumer confidence and private consumption. indeed, it is up to us to set in motion such a virtuous circle! the policy program of the newly elected austrian government includes several important measures to foster austria´s attractiveness for business and investors. starting out from a small budget deficit of 0. 6 % in 2002, the government´s fiscal policy stance foresees some cyclically motivated widening of the deficit to 1. 3 % this year. looking ahead, the government intends to make significant tax cuts. the cutback of the share of government in the austrian economy is appropriate and in line with international endeavors to improve the quality of public finances. the tax cuts should be accompanied one for one by expenditure cuts so as to ensure that a balanced budget is achieved over the cycle. where do central and eastern european countries enter this picture? it is my conviction that this historic reunification of europe will mutually strengthen today's accession countries and the eu. having said this, challenging tasks lie ahead. first and foremost, we will have to provide stability in a broad sense : political stability, macroeconomic stability, financial market stability and price stability. the framework which is in place provides for such broadly based stability. thus, enlargement will encourage growth and employment in a wider europe. economic and monetary integration of the accession countries will proceed in three stages : first, the acceding countries will join the eu in may 2004, second, the new member states will participate in erm ii,