These require above all well-functioning labour and product markets which allow wages and prices to adjust if local economic conditions have changed. In addition, national budgets must have sufficient room for manoeuvre to let automatic stabilisers work. As a further element of the Stability and Growth Pact, all Member States have therefore committed themselves to the achievement of a budgetary position close to balance or in surplus over the medium term. Third, it is a well-known fact that the effects of monetary policy occur with long and variable lags. For this reason, it is impossible to use it for fine-tuning purposes.
Monetary policy can only pursue price stability in the medium term.
Once price stability is ensured, monetary policy may be used in such a way as to contribute to an automatic stabilisation of the business cycle, which means that this stabilisation does not require discretionary measures. Fourth, sustainable growth and a healthy creation of employment require more than just an appropriate monetary policy. This can be aptly illustrated by the current unemployment problem in Europe. As its underlying causes are structural, its solution requires structural remedies and not an expansionary monetary policy. As the experience of recent years shows, those Member States that have undertaken fundamental labour market reforms have achieved both a strong recovery of employment and stable prices.