Harmonised prices data do not exist over a longer time period, but available national figures point to the fact that differences are much smaller than they were in some other periods in the past. For example, in the early 1990s, the differences between the highest and lowest inflation rates were of the order of magnitude of over 10 percentage points. Thus, a more stable price environment in the euro area as a whole has also been accompanied by a considerable degree of narrowing in inflation rate differentials. The move to a single currency and the introduction of the euro are based on the success of this convergence process towards low inflation rates in all participating countries. It may be recalled that the achievement of a high degree of price stability is one of the convergence criteria established in the Treaty to be used to assess whether countries have fulfilled their obligations regarding participation in Monetary Union. However, this does not mean that after countries have joined the Monetary Union they will - at all times - have the same rate of inflation. To put the current differences in inflation in the euro area into context, it is useful to compare developments in the euro area with variations in inflation in the United States, a large single currency area which has been established for a long period of time and which is highly integrated in terms of labour and product markets.
This is as important for countries which are performing above the euro area average as for those whose economies are performing below the average. In circumstances where, for example, the economy is weaker than the euro area - and where monetary policy may be regarded as too tight - a high degree of flexibility is required in order to avoid significant increases in unemployment. Should, for example, the economy 3  BIS Review 123/1999  be growing strongly and unemployment be falling more rapidly than in the euro area, a more flexible labour market could help to contain the upward pressures on prices that could emerge sooner than in the euro area as a whole. The current recovery in the euro area provides a good opportunity to initiate new policies designed to improve the functioning of markets. The Netherlands has shown that this can bring about positive results. Although inactivity still remains high, the rate of unemployment is now one of the lowest in the euro area. It would be a good thing if the Netherlands could show that the dialectics of progress do not apply in this case. It is also necessary for fiscal policy to play its part. The Stability and Growth Pact is sometimes seen as constraining the role of fiscal authorities, but this is a misconception. The Pact is required in order to ensure that responsible fiscal policies are pursued by all participating Member States.