credibility with the markets inside and outside the euro area. in my view, this process will be greatly facilitated by a monetary policy strategy oriented towards guaranteeing price stability in the medium term, rather than responding to short - term considerations. i should emphasise that it is the ecb ’ s independent status which will continue to allow it to stand above day - to - day pressures, to pursue a stability - oriented policy to the benefit of all citizens without the interference of short - term political objectives and to ignore short - term market developments if they are deemed to be excessive. the ecb is a novel and unique institution and in the performance of its tasks it is still navigating uncharted waters. take, for example, the differing impact of monetary policy on economic activity in the different euro area member states, which demands a well - balanced and comprehensive consideration of the precise timing and magnitude of interest rate decisions. the ecb must formulate a single monetary policy for an economic area made up of 11 distinct national economic policy jurisdictions. our monetary policy decisions must thus always be oriented towards the conditions of this currency zone as a whole, since monetary policy by its nature is one and indivisible. precisely this is our treaty mandate. the ecb must develop into a truly european institution and we are making good progress in that direction. however, developing a wider perception of the euro area as an entity appears more complicated. certainly, there are some areas where awareness of a single “ euro area economy ” is well developed. the financial market operators, for instance, appear to have adapted very quickly to the reality of the euro. the extensive recourse to the more favourable financing opportunities in the now more unified financial market or the ongoing consolidation in the banking sector bear witness to this shift of perception from the national to the european level. in this context, allow me to add the following observation. the development of a highly integrated euro area financial market and the ultimate establishment of a pan - european banking industry will raise the issue of the optimal organisation of supervision of the european financial sector. today supervision is organised on a national level ; financial markets are not yet fully integrated and we do not as yet have a genuinely pan - european banking industry. however, the situation is clearly dynamic. while it remains to be seen how quickly the situation will change, this example highlights the fact that the euro area is not yet an entity itself and not yet perceived as such in some respects. looking back on the first few months

of the existence of the euro, we have witnessed that singular and isolated news and data releases from individual economies within the euro area have sometimes inappropriately been interpreted as indicators for the entire currency zone. such inadequate analysis can produce real difficulties, especially when the markets magnify and exaggerate the effects of these misconceptions. this phenomenon may possibly be explained by insufficient information about the new european framework. however, another reason might lie in the conduct and presentation of member states ’ economic policies. it appears that member states are still learning to communicate adequately that, in economic terms, they also consider themselves constituent parts of a larger entity and thus also regard their domestic economic policy decisions “ as a matter of common concern ”. it is, however, encouraging to see that these deficiencies are being addressed and that efforts are being made to render the impact of economic decision - making on the euro area as a whole visible and transparent for the markets and the public at large. moreover, the recognition that europe ’ s performance depends to a large extent on its ability to take on the task of implementing real structural reforms appears to be gaining ground. there is no alternative to orienting the conduct and the presentation of economic policies to the new framework of emu in order to explore its full potential. it remains to be seen whether these adjustments will have institutional implications, either motivated by functional necessity or in response to the demands from our partners and interlocutors. i should add that institutional changes will in any case be on the agenda of the eu in the coming years, not least in order to endow europe with a capacity for decisive external action. this is a consequence not only of the momentous changes in the wider europe, but also the projected expansion of the eu. the european union has launched an enlargement process of unprecedented dimensions, with 12 countries from central, eastern and southern europe currently involved in, or preparing, entry negotiations. the prospect of eu membership and the eventual participation in emu has galvanised these countries into pursuing economic reforms, re - orienting their trade and embarking on a difficult and sometimes painful process of disinflation. in this context, there should be no denying that the european union too will have to reform its institutions and decision - making structures in order to cope with a larger number of member states. by agreeing to convene an intergovernmental conference next year, the member states have taken the first steps in this direction. so far the progress