The recent increase in inflation was to a large extent due to exceptional and short-lived factors – such as particularly adverse weather conditions in some parts of the euro area, which led to increases in food prices – as well as to the anticipated influences of indirect taxes and base effects resulting from developments in energy prices. Taking these factors into account, there is no evidence so far of a significant impact on the price level as a result of the euro cash changeover. Nor do we expect substantial effects in the months to come. There is reason to assume that the physical introduction of the euro banknotes and coins will strengthen competition, thereby supporting the maintenance of price stability. Beyond the short term, the outlook for inflation remains favourable. One important concern, however, relates to forthcoming wage negotiations. If wage moderation is maintained, as we currently expect and in any case consider warranted in order to foster employment growth, and assuming that other determining factors also develop favourably, annual inflation rates should fall safely below 2% this year. They should also remain at levels consistent with price stability. Finally, let me underline the importance which the Governing Council attaches to the Stability and Growth Pact and its strengthening through diligent implementation of the appropriate procedures. The responsibility for these procedures lies with the European Commission and the ministers of finance.
Today, we can look back on a period of more than three years in which the ECB has successfully pursued a stability-oriented single monetary policy serving more than 300 million citizens. And we all have the tangible proof of Monetary Union in our pockets, following a highly successful cash changeover process which represents another historic milestone in the process of European monetary integration. Indeed, already now the level of cash payments in euro is close to 100% in all the countries of the euro area. This means that the cash changeover can be considered as good as complete, i.e. well before 28 February, after which date the legacy currencies of the euro will no longer be legal tender in any euro area country. Together with the Treaties founding the European Communities, the Maastricht Treaty is one of the most important and visionary legal texts in the history of the European integration process. With the euro, the Treaty offered tangible proof of what the vision of European Union is about, namely bringing the people of Europe closer together and ultimately 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.