The economic upswing in Germany regained momentum at the beginning of the year. Exports are still the main force driving the economy. We expect to see growth of 2.2 percent in 2006 after 0.9 percent last year. The labor market is set to turn the corner.

For the first time the EU member states have drawn up national action plans with reform projects in line with the Lisbon strategy. However, in many areas these programs remain vague. Some doubt hangs over the question whether the annual review will adequately enhance the transparency of the Lisbon process and significantly spur countries' reform ardor. In any event, national governments should make the most of the current economic tailwind to flesh out their programs and demonstrate more reform zeal.

Our Lisbon Indicator helps measure progress towards fulfillment of key targets which the EU set itself in the year 2000. Initially, we covered the EU-15. We can now present results for the four big euro area economies. The overall indicator and its elements allow us to gauge where countries stand in the Lisbon process. Strengths and weaknesses are highlighted.

Two important initiatives are on this year's political agenda: the revitalization of the Lisbon Strategy and the reform of the Stability and Growth Pact. Fiscal policies in line with stability are easier to implement in a strong economy, and both issues are important in determining the international role of the euro.

Germany is not the only EMU country where a balanced budget is still a long way off – the same applies to France and Italy. All three big euro area economies look set to breach the 3 % ceiling next year. With regard to the trend in public sector debt, an enormous effort will be required in the years ahead. By contrast, Spain remains on the path of virtue in terms of budget consolidation.