and fiscal policies will be an outcome of these policies rather than our initial objective. this assignment of responsibilities increases transparency and facilitates accountability. under normal circumstances the joint interaction of all policies would be optimal provided that the basic allocation of instruments and objectives is respected and that policy - makers focus on their main objective. the eurosystem is always ready to engage in an open exchange of views and information with policy - makers. moreover, the public and governments are kept well informed about the ecb ’ s objective and strategy. monetary policy alone – however well designed and implemented – cannot solve europe ’ s economic problems. national fiscal authorities can make a significant contribution to the establishment of favourable conditions for sustained economic growth and high employment in the medium to long term by conducting sound budgetary policies. appropriate structural reforms implemented by national governments that improve the flexibility and efficiency of labour and goods markets are of utmost importance. an increase in the flexibility of labour and goods markets would certainly also help to lessen the impact of shocks, regardless of their nature. moreover, continued wage moderation in both the public and private sectors would contribute to the reduction of the unacceptably high level of unemployment in many parts of the euro area. if policy - makers take their responsibilities seriously and respect the assignment of instruments and objectives as laid down in the treaty establishing the european community, this will be the best contribution that they can make to establishing a solid foundation for sustained stability and growth in the euro area.

although monetary data contain information which is vital for monetary policy decisionmaking, monetary developments alone will clearly not constitute a complete summary of all the economic information necessary to enable appropriate policy decisions to be taken. the governing council recognises that it is important, in parallel with the assessment of monetary growth, to look at a wide range of financial and other economic indicators, including economic forecasts. this systematic analysis of all other relevant information about economic and financial conditions will ensure that the governing council is as well informed as possible when taking monetary policy decisions. this broadly based assessment takes into account, inter alia, the information content of wage developments, exchange rates, fiscal indicators, real activity, assets and commodity prices. internal forecasts of economic activity and prices in the euro area can also contribute to the success of an appropriately forward - looking monetary policy. monitoring monetary, financial and economic developments also helps to identify the nature of shocks hitting the economy. it thereby contributes to the assessment of overall economic developments. on the basis of this thorough analysis, the interest rate will be set in a way that best serves the maintenance of price stability. the contribution of fiscal policy to a stable euro with regard to fiscal policies, i should like to stress the following main points of interest with regard to a stable euro : • a sound conduct of fiscal policies is important for the stability of the euro. • in particular, strict implementation of the stability and growth pact by each member state is vital. • the targets envisaged in the current stability programmes to bring down government deficits and debt levels represent a minimum requirement for most member states rather than a final aim. budgetary positions in the euro area as a whole have not yet been consolidated sufficiently. government debt as a percentage of gdp remains far too high on average and has only started declining hesitantly in the recent past. deficit - to - gdp ratios in a number of countries are still closer to the 3 % value set in the treaty as a reference for excessive deficits than to the medium - term balanced or surplus position envisaged in the stability and growth pact. in case of a prolonged growth slowdown we might therefore easily see deficits reaching excessive levels. in addition, deficits fell very slowly in 1998, this reduction in fiscal imbalances being the result of strong economic growth and falling interest payments rather than of genuine fiscal consolidation measures. structural and primary balances have even deteriorated. in addition, the progress in structural fiscal consolidation envisaged for the medium term appears to be