to ensure that risks to price stability do not materialise, thereby making an ongoing contribution to sustainable economic growth and job creation. as regards fiscal policies, while the budgetary results reported for 2005 are mostly better than anticipated a few months ago, the budget balances planned for 2006 imply no significant progress in fiscal consolidation for the euro area as a whole. given the economic outlook, a faster pace of deficit reduction is necessary. delaying fiscal consolidation in times of improving economic activity implies risks for the medium term, as has been observed in the past. speeding up deficit reduction on the basis of credible and fully specified measures as part of a comprehensive reform programme would help to enhance confidence in the medium - term prospects of the euro area and prevent a repeat of past experiences, when complacency in good times contributed to persistent budgetary disequilibria. as regards structural reforms, the governing council welcomes the call by the european council, which met in brussels on 23 - 24 march 2006, to maintain the momentum of the re - launched lisbon strategy for growth and employment. as emphasised by the european council, the focus should now be on ensuring the effective, timely and comprehensive implementation of the measures agreed in the national reform programmes presented by member states and, if necessary, on strengthening them. these measures are designed to, among other things, enhance the sustainability and quality of public finances, promote flexible labour and product markets, support a favourable business environment, and ensure a fully operational eu internal market, including the markets for energy and services. applying comprehensive structural reforms is of particular importance for the euro area countries, in order to increase wage and price flexibility and the resilience to shocks, facilitate structural adjustment, raise potential output growth and job creation, and reduce price pressures, thereby facilitating the task of the single monetary policy. we are now at your disposal for questions.

developments, according to eurostat ’ s flash estimate, annual hicp inflation was 2. 2 % in march 2006, compared with 2. 3 % in february and 2. 4 % in january. in the short run, inflation rates are likely to remain above 2 %, with the precise levels depending largely on developments in the more volatile components of the index. beyond the short term, changes in administered prices and indirect taxes are expected to significantly affect inflation in 2006 and 2007, and an upward impact may also be expected from the indirect effects of past oil price increases. at the same time, wage dynamics in the euro area have remained moderate over recent quarters and growth in wages is expected to remain contained, partly reflecting strong global competitive pressures, particularly in the manufacturing sector. over the recent past, moderate wage trends have helped to dampen domestic inflationary pressures ; looking ahead, it is crucial that the social partners continue to meet their responsibilities in this regard, also in the context of a more favourable economic environment. risks to the outlook for price developments remain on the upside and include further increases in oil prices, a possibly stronger pass - through of oil price rises into consumer prices than currently anticipated, additional increases in administered prices and indirect taxes, and – more fundamentally – stronger wage and price developments than expected due to second - round effects of past oil price increases. turning to the monetary analysis, the latest developments confirm that the stimulative impact of the low level of interest rates remains the dominant factor behind the high trend rate of monetary expansion. moreover, the annual growth rate of credit to the private sector has continued to increase over recent months, with borrowing by households – especially loans for house purchase – and nonfinancial corporations rising rapidly. overall, strong monetary and credit growth in an environment of ample liquidity in the euro area continues to point to upside risks to price stability over the medium to longer term. to sum up, annual inflation rates are projected to remain elevated in 2006 and 2007, and the economic analysis indicates that the risks to price stability remain on the upside. given the strength of monetary growth and the ample liquidity situation in a context of improving economic activity, crosschecking the outcome of the economic analysis with that of the monetary analysis supports the assessment that upside risks to price stability over the medium to long term prevail. it is essential that medium - term inflation expectations remain firmly anchored at levels consistent with price stability. accordingly, the governing council will continue to monitor very closely all developments