light on the “ new economy ”, which originated in the us in the mid - 1990s. if you recall, the new paradigm had it that growth was strongly driven by large and steady increases in productivity, that in a world of rapid technological progress there was no relation between realised profits and share prices and that the business cycle was dead. the latest data indicate that productivity per hour in the us - where most of the “ new economy ” was meant to have taken place - averaged a growth rate of 2 % in the period 1996 to 2001. this is still significantly above the average of 1. 2 % for the preceding period from 1982 but certainly less than the figure of 3 % or more that was circulated not so long ago. to me, this downward revision seems to be a powerful indication that the wonderlands of the “ new economy ”, where the classical economic rules cease to be relevant, are still some way off. yet, it also has to be conceded that the innovations in the ict sector have been feeding through to the economy as a whole, enabling many people to work more efficiently. and, in the end, this will be the lasting impact of the ict revolution. all in all, i conclude that the signals from the worlds ’ largest economy are mixed at this juncture. however, while negative news have gained prominence over recent weeks, in my view the most likely outlook is a continuing expansion, although one that is more moderate than previously thought. current cyclical developments in the euro area display a high degree of synchronicity with the us. following negative growth at the end of 2001, the euro area has entered into a moderate economic recovery. both monetary and fiscal policy have given stimuli. owing to the extensive social safety nets, the automatic stabilisers have been the main channel of fiscal expansion. however, the strength of the recovery is disappointing. at the heart of the matter lies continued weak domestic demand. the euro area seems to lack the ability to initiate a strong and sustainable expansion on its own. this, of course, is intrinsically linked to the rigidities still present in our labour markets. in an environment of slow growth, the deteriorating fiscal positions of some european countries have prompted a debate on the future of the european stability and growth pact. any attempts to weaken the pact are counterproductive and should be resisted. fiscal discipline is a sine qua non for a satisfactory functioning of the monetary union in the longer run. the existing rules are simple and transparent and they

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