facilitating their lives. having been instrumental in laying the foundations for the euro, the maastricht treaty will remain vital and indispensable for the successful functioning of emu. the medium - term macroeconomic policy framework laid down in the maastricht treaty has contributed to a stable macroeconomic environment, and will continue to do so. in addition, the treaty provides for a clear allocation of responsibilities between eu institutions and member states, as well as clear mandates for all involved. the maintenance of price stability – the ecb's primary objective –, the independence of the eurosystem and the provisions safeguarding fiscal discipline, in particular as enshrined in the stability and growth pact, are among the hallmarks of this framework. furthermore, the path towards participation in the euro area mapped out in the maastricht treaty, focusing on sustainable economic convergence as a prerequisite for adoption of the euro, will also serve to guide prospective member states. the name maastricht will therefore always be connected with the euro and will forever have a prominent place in the history of europe. let me now turn to our regular examination of recent monetary, financial and economic developments. the governing council concluded today that there was no reason to change its previous assessment. accordingly, the key ecb interest rates were kept unchanged at a level which remains appropriate for the maintenance of price stability over the medium term. starting with the analysis under the first pillar of our monetary policy strategy, the three - month average of the annual growth rates of m3 rose to 7. 8 % in the period from october to december 2001, from 7. 4 % in the period from september to november. the governing council considers that monetary developments thus far do not indicate risks to price stability. the build - up in liquidity reflected in these data occurred in an economic and financial environment characterised by exceptionally high uncertainty worldwide and should therefore be only temporary. this assessment of low inflationary risks is also supported by the declining trend in the growth rate of loans to the private sector. however, a continuation of strong m3 growth could call for a reassessment of monetary developments, especially if there is further evidence of a recovery in the euro area economy. regarding the second pillar, while actual euro area production growth in the fourth quarter of last year and in the early part of this year is still expected to be subdued, new data confirm our expectation of a gradual improvement in economic activity in the course of the year. uncertainty as

expand at a robust pace at the end of last year. surveys of consumer and industrial confidence conducted by the european commission in early 2000 indicate that the positive development of economic activity should have continued in the first months of this year. financial markets also expect a prolonged phase of economic expansion, as can be inferred from the fact that the yield curve has remained relatively steep. in this environment, employment is expected to increase further and the still very high level of unemployment should continue to fall. to date, wage growth has been moderate and the same applies for actual wage settlements to date. it remains important that the expected improvements in economic conditions and labour market prospects are not jeopardised by inappropriate wage settlements. in fact, wage moderation would help both to contain inflation in the euro area and lead to further progress in employment creation. wage negotiators can be assured that the primary objective of the eurosystem is the maintenance of price stability in the medium term and that we are fully committed to this objective. the temporary increases in the 12 - month rate of consumer price inflation which we are currently observing as a result of the oil price developments should not be reason for higher wage demands. there is now a broad consensus, also at the level of governments, that the currently favourable prospects for output growth in the euro area would be enhanced by a deepening of the structural reform process in the euro area. governments of the euro area have already taken important initiatives, but the high level of unemployment in many countries shows that there is still much to be done. in this respect, fiscal policies can also make a substantial contribution to maintaining favourable economic conditions by using the current upswing as an excellent opportunity to proceed swiftly towards fulfilling the objectives of the stability and growth pact. governments should continue the process of fiscal consolidation which was observed in the run - up to stage three with ambition. aiming at positions of budget surplus and reducing debt to gdp ratios should free resources, which could be used by the private sector to finance new initiatives to create employment. i am confident that the first decade of the new millennium could, if all parties concerned take their responsibilities very seriously, mark the beginning of a prolonged period of price stability, growth and employment creation. inflation rates are currently among the lowest levels observed after the war, and we are determined to maintain this very substantial achievement. fiscal policies have already made good progress in correcting the serious mistakes of the 1980s and early 1990s and they are encouraged to continue on the path of fiscal consolidation