This indicates that significant structural rigidities have prevented an appropriate adjustment of wages. Taking all of the above into account, at its last meeting on 6 February 2003, the Governing Council concluded that following the decision to lower the ECB key rates by 50 basis points in December, the monetary policy stance remained appropriate to preserve a favourable outlook for price stability in the medium term. Consequently, the ECB kept its key interest rates unchanged. Their already low level should help to counterbalance the negative effects on economic activity that currently stem from the high degree of worldwide uncertainty and should, therefore, contribute to a sustainable economic recovery in the course of 2003. For the time being, we still assume that the high degree of uncertainty will decline in the course of this year. However, at this juncture it is not possible to assess how the ongoing geopolitical developments will affect the world economy and, in particular, the euro area economy. The Governing Council will continue to monitor closely all factors that may affect the prospects for inflation in the euro area. The euro area outlook will also very much depend on progress in other policy areas. As regards fiscal policy, full adherence to the fiscal policy framework laid down in the Treaty and the Stability and Growth Pact provides a sound basis for limiting the risk of fiscal imbalances occurring and thus contributes significantly to favourable financing conditions for the private sector. At the same time, it preserves an appropriate medium-term orientation for fiscal policy.
At a more general level, the lack of a level playing field in the enforcement of the new financial standards has a potential to fragment the global financial system and to lead to a suboptimal allocation of capital of liquidity and to overconsumption of scarce resources, such as the safe assets used as collateral by financial market participants. OTC derivatives are a case in point. I therefore strongly welcome the recent agreement reached between the European Commission and the US Commodity Futures Trading Commission (CFTC) on a common path forward regarding a number of measures on how to approach cross-border issues. In this context, the notion of substituted compliance is a useful tool, as it will help to reduce the risk of duplication and potential frictions of rules. Clearly, convergence at a very granular level may not be achieved. It may not even be desirable, as specific differences may reflect the specific institutional and regulatory frameworks in the jurisdictions concerned. Nevertheless, it needs to be ensured that the outcome in all material aspects is similar. A key objective of the G20 mandate for OTC derivatives reform was to ensure effective systemic risk reduction in these markets. It is unlikely that we will achieve this objective by converging on the lowest common denominator rather than by achieving common best practices. However, this may be the result if substantive regulatory differences are not addressed and consequently, opportunities for regulatory arbitrage open up.