to be appropriate. at the same time, the governing council made clear that it will carefully monitor all developments that might affect its assessment of risks to price stability. turning to recent fiscal policy developments, you are very well aware of our serious concerns. in recent months we have seen a gradual move away from the commitments made under the stability and growth pact. the governing council had already made clear on 6 november that the recommendations of the european commission regarding the steps to be taken in the excessive deficit procedure had pushed the room for interpretation of the rules and procedures to the limit. as you already know from the governing council ’ s statement to the public last tuesday afternoon following the decision of the ecofin council, the governing council deeply regrets the ecofin council ’ s decision not to act on the basis of the commission ’ s recommendations regarding france and germany. it fully shares the views made public by the commission on the ecofin council ’ s conclusions. the conclusions adopted by the ecofin council carry serious dangers. the failure to respect the rules and procedures foreseen in the stability and growth pact risks undermining the credibility of the institutional framework and confidence in the sustainability of public finances across the euro area. the governing council takes note of the commitments by france and germany to correct their excessive deficits as rapidly as possible, and by 2005 at the latest, and strongly urges the governments concerned to live up to their responsibilities. it is now absolutely imperative that effective action be taken to limit negative effects on confidence. moreover, we also note that the ecofin council stands ready to act on the basis of the commission ’ s earlier recommendations to give notice to the two countries, should they fail to comply with the council ’ s conclusions. the public can rest assured that the governing council remains staunchly committed to maintaining price stability. we firmly believe that the need to correct the excessive deficits in some countries and to pursue sound fiscal policies in general have to be framed within a comprehensive and credible medium - term reform strategy. it is necessary for executive branches, parliaments and social partners to push ahead with structural reforms aiming at enhancing the competitiveness of the euro area, notably in labour and product markets, as well as in social security systems, in order to foster a more flexible allocation and utilisation of capital and human resources. the governing council very strongly supports recent and ongoing efforts by a number of governments in this direction. it also encourages social partners to fully commit themselves to the objective of making the euro area a more dynamic

##ntial policy on the real economy, and its relationship with other economic policies. drawing my remarks to a close, i should once again like to voice my deepest thanks to you all for setting aside some of your valuable time to be here. i know how chockablock the schedule is, but i do hope you will also have a chance, during your all too short stays here, to savor the beauty of the korean culture and natural environment. bis central bankers ’ speeches