it judges that the progress realized in underlying inflation is consistent with inflation stabilizing at 2 % over the medium term. commitment to a symmetric inflation target requires particularly strong or long - term monetary policy measures when interest rates are close to the zero effective lower bound. this commitment, which is buttressed by the new forward guidance, is crucial to support the anchoring of long - term inflation expectations to 2 %, but as said it may also imply a transitory period in which inflation is moderately above target. a medium - term orientation for the inflation target is baked in into the new strategy, which also makes it possible, where necessary, to smooth out other economic shocks, such as shocks related to employment or financial stability. if actual inflation is slower or faster than targeted, monetary policy will respond to deviations gradually, considering the nature of the economic disruption. deviations estimated to be temporary may not be responded to at all, but seen through. the symmetric inflation target should help to ensure a stable and predictable price outlook, which is a key prerequisite for sustainable economic growth and a high level of employment. price stability, balanced growth and a high employment rate are mutually consistent goals, and successful monetary policy improves the well - being of citizens by focusing on price stability. to this end, targeted monetary policy communication can improve people ’ s understanding of how monetary policy responds to current and projected economic conditions. * * * the strategy review also examined how monetary and fiscal policy can work together during and after times of crisis. the conventional thinking gives a clear division of labour between the monetary and fiscal authorities : monetary policy should promote price stability, and fiscal policy should keep sovereign debt on a sustainable path. however, in a period of low interest rates, the scope for monetary - fiscal policy interactions is possibly wider. counter - cyclical fiscal measures complement monetary policy when key policy interest rates cannot fall any further. similarly, low interest rates can keep financing conditions favourable during and after crisis, thus creating space for fiscal authorities to respond to an economic downturn and hence stabilize the economy. fiscal policy also matters for the transmission of monetary policy in low interest rate environments. a recent study by bank of finland staff, ” the power of forward guidance and the fiscal theory of the price level ” 1, argues that fiscal support is essential for forward guidance announcements to have the right kind of effect on inflation and output. fiscal support remains important at the effective lower bound and before inflation robustly converges to the 2 % target. moreover

very long term, several parameters characterising their economies are bound to fluctuate around some average of the euro area as a whole. put more clearly, there will always be some diversity as in other vast continental economies with a single currency like the united states. in particular, this should be the case for countries catching up in terms of gdp per capita and price levels and would thus show faster output growth and inflation. for some economies, the observed diversity may go beyond the completion of the “ catchingup ” process. this should be the case for corrections of past excesses in terms of overall cost and price competitiveness, particularly in the tradable goods and services markets. in such situations, national governments and social partners need to take action to address excessive wage developments and strengthen productivity growth in order for unit labour costs in those economies to increase less rapidly than the average of the euro area. ladies and gentlemen, the economic and financial environment is changing and euro area countries are becoming progressively more interdependent. several potential concerns preceding the launch of the euro have been dispelled. at the same time, more must be done to increase the flexibility and adaptability of euro area economies. structural reforms are essential to facilitate and speed up the endogenous corrections of deviations of economic parameters. reforms will also enhance growth potential for the euro area as a whole as well as reinforcing its resilience in the case of shocks. we also need to monitor and fully understand the factors behind the persistence of diversities among euro area countries : this persistence is in some cases fully justified. in other cases it has to be corrected in order to avoid the accumulation of differences over time. this is particularly true as regards the cost competitiveness indicators. euro area policy - makers need to discuss the underlying factors and the necessary corrective measures in the appropriate institutional fora : this should ensure a smooth functioning of the euro area in the coming years. in such a rapidly changing world, with many simultaneous developments brought about by the progress of science and technology, the globalisation process and the profound changes in europe – which have been the subject of my reflections – this hard work would have been in any case necessary. the euro has brought price stability, favourable medium and long - term interest rates, and a remarkable degree of resilience in a complex environment marked by shocks, three achievements that lend support to these urgently needed structural reforms. i thank you for your attention.