Central banks can best contribute to financial stability, including containing contagion risks, by providing a firm anchor for inflation expectations as well as by supplying the financial system with the necessary liquidity. Monetary policy, however, cannot substitute for the need for governments and private agents to deliver on their own responsibilities.
The forthcoming enlargement of the European Union comes at a moment when the euro area sees increasing signs of a gradual recovery in economic activity. While growth has been relatively modest so far, both external and domestic factors give reason to expect a strengthening of the recovery through 2004 and beyond.