remains modest. both monetary and credit growth continue to be supported by the historically low level of interest rates in the euro area and may also reflect the improvement in the economic environment over the last few quarters. given the continued strength of monetary growth, liquidity conditions remain ample in the euro area. the impact of this high level of liquidity on inflation over the medium term will depend on future developments in the economy and financial markets. should excess liquidity persist, it could lead to inflationary pressures over the medium term. to sum up, the economic analysis indicates that the main scenario for the outlook for price developments over the medium term is in line with price stability. cross - checking with the monetary analysis does not alter this view at the current juncture. as usual, i also wish to make a few remarks regarding other policies in the euro area. with regard to fiscal policies, the governing council sees increased reasons for concern. on the basis of the latest commission forecasts, the average euro area budgetary position is not expected to improve much this year or next. a growing number of countries are likely to report significant imbalances, while fiscal consolidation efforts might fall short of commitments. it is essential that all countries concerned undertake credible measures to address these concerns. such measures should be part of a comprehensive reform strategy. this would underpin the ongoing economic upswing by boosting confidence in sound public finances and by improving the prospects for future economic growth. the governing council welcomes the decision by the commission to request more consolidation efforts from a number of countries. turning to structural reforms, the governing council reaffirms its view that such reforms are essential if the euro area ’ s growth potential is to expand substantially. in particular, both our employment rate and our labour productivity growth need to increase significantly. following our discussions here in finland, let me stress that this requires a strengthened technological and scientific base and its application in the euro area as a whole, fostered by major efforts to enhance the human capital of our economy. in this context, we are particularly concerned that youth unemployment remains high in several countries. in order to achieve these goals, it is necessary to strengthen the implementation of structural reforms, both at the european and the national level. the lisbon agenda provides an excellent diagnosis of the problem and we have a good understanding of the measures needed to deal with it. we strongly support the ongoing reforms, which should be speeded up across the euro area. it is important to understand that everyone will be better

willem f duisenberg : making monetary policy in a broad monetary union “ jean monnet ” lecture by dr willem f duisenberg, president of the european central bank, at the european business school london on 12 october 2000. * * * ladies and gentlemen, i am very grateful to the european business school london for having invited me to deliver the annual jean monnet lecture. this is a great honour because the occasion recalls the man who, perhaps more than anybody else, devoted his life to making the european union a reality. as president of a very young european institution, the european central bank ( ecb ), i feel very close to his intellectual legacy. since jean monnet ’ s times, the process of integration among european countries has advanced a great deal, and very much in the direction he advocated. within this process, the creation of monetary union, with an independent central bank at its heart, represents a fundamental step. on 1 january 1999, the european central bank assumed responsibility for monetary policy in the euro area - the second largest economic area in the world after the united states. overnight, the euro became the currency of almost 300 million people. i am deeply convinced that this crucial step has created a sound foundation for attaining a substantially higher level of welfare in our economies. although the united kingdom, our host country today, is not yet part of the single currency area, its economy and the 11 - soon to be 12 - economies that have adopted the euro are inextricably interlinked, also through their membership of the european union. while remarkable success has been achieved, one should not forget that many challenges, as well as opportunities, lie ahead. these challenges cannot be met and these opportunities cannot be fully exploited without building and enhancing - with full respect for national and regional traditions - a “ european culture ”. this is all the more true of institutions such as the ecb, which assemble their staff from all 15 eu countries in order to fulfil an important public mandate for a large part of europe, namely the euro area. ever since the ecb was established, we have made every effort to develop a spirit of cooperation and dedication towards a common goal among our staff, as well as among the members of the governing council who hold the responsibility for final policy decisions. in this sense, jean monnet ’ s words “... to make all men work together, to show them that, beyond their divergences or over and above frontiers, they have a