I am very pleased to participate in today's conference. It provides an excellent opportunity to recognise the important progress in the economic and financial sphere already achieved by the authorities of the Federal Republic of Yugoslavia. It is also a crucial moment to encourage and support them in their efforts to take on the challenges that still lie ahead on the path to a sustainable market economy.

The FRY authorities have taken important steps towards the reintegration into European structures and the international financial community. We are pleased that the Federal Republic of Yugoslavia became a member of the IMF and the EBRD in December of last year, and that both institutions have started operations in this country. We are also pleased that in May of this year the FRY became a member of the World Bank and that first lending operations will start soon.

We are now very much looking forward to a speedy normalisation of FRY relations with the European Investment Bank. In this respect, we welcome the willingness of the authorities to take on guarantee obligations stemming from previous EIB loans and look forward to a complete normalisation of financial relations in the near future. In this context, I am also very happy to announce that the Commission has adopted two days ago a proposal to extend the EIB's lending mandate to the FRY. EU Member States have already indicated their support for such an intervention by the Bank. We therefore hope that a formal decision will be taken soon. This should allow the EIB to start financing badly needed projects in the area of transport and energy before the end of the year.

We should recognise that progress made so far can be attributed to efforts on many sides, FRY authorities, staff of International Financial Institutions, and their shareholders. It is also worth stressing the role that Switzerland has played in continuously supporting the FRY in this process, also by providing bridging operations where needed and feasible.

Membership and access to IFI financing, as well as support from the Paris Club and other creditors are important but not sufficient. It is also necessary to establish and implement a comprehensive macro-economic and structural policy framework.

In this respect, I would like to thank the World Bank and the IMF for the excellent work they have accomplished in recent months. Without their outstanding commitment it would not have been possible to progress so rapidly with a policy agenda for the FRY. It is reflected in the recently adopted IMF stand-by arrangement that sets ambitious policy targets for the near future. It is also reflected in the Economic Recovery and Transition Programme (ERTP) that the World Bank elaborated, in co-operation with the European Commission and in consultation with the FRY federal and republican governments.

The FRY authorities have implemented first encouraging measures towards economic stabilisation and structural adjustment and I will not repeat what has been said already, although I would certainly like to welcome this progress.

However, much remains to be done. A key for success is a strong and sustained commitment by the authorities to economic reform and stabilisation. I would just like to mention a few policy issues.

It was right to discontinue monetary financing on a large scale and it already led to a substantial reduction in inflation. It is now essential that the authorities remain committed to such a policy of restraint to achieve the envisaged further reduction of annual inflation as foreseen in the IMF programme.

On the fiscal side, the planned containment of the consolidated general governments' deficit in 2001 to 3.8% of GDP requires a set of comprehensive fiscal measures on both the expenditure and revenue side.

A further prioritisation of spending is of utmost importance in order to make resources available for new expenditure burdens that will inevitably stem from investment and maintenance cost, resumed debt service payments, and the need for targeted and temporary social support to the most vulnerable parts of the population.

Controlling and containing subsidies and transfers to state companies is another challenge that needs to be addressed in Serbia and Montenegro. It is therefore important that the authorities continue to gradually increase prices for energy, public utilities and pharmaceuticals. Moreover, improved governance is a major prerequisite for cutting costs in public enterprises.

Improved standards for fiscal management and budget transparency will be crucial to sustain financial support from donors. There is also clearly a need for an overhaul of the tax policy framework to increase efficiency and revenues. I am convinced that donors are willing to provide technical support and advice in these important areas.

The FRY also needs to move ahead rapidly with reform in the area of trade and customs. Encouraging steps have been made, but the authorities should consider further reductions of tariffs. It is equally important to continue with legal and institutional reforms so as to enhance foreign direct investment. We know from experience with other transition economies that progress in these areas is critical for long term sustainable growth and a reduction of poverty.

Even if economic reforms progress well and substantial debt relief is provided, the FRY requires substantial donor support. It is evident, that if external financial support were not forthcoming, the FRY governments might be forced to delay the pace of restructuring its economy, with obvious negative consequences for growth.

On 23 May the European Commission has put forward a proposal for a Community macro-financial assistance of up to €300 million with a substantial grant element to alleviate the financial constraints of the FRY in the framework of the IMF stand-by programme. The main aim of this assistance is to support stabilisation and reform efforts of the federal and republican governments and to contribute to a sustainable balance of payments situation. The European Parliament has strongly supported this proposal and the EU Council has decided in principle on this matter.