Against the background of the current economic developments, it offers the necessary flexibility. Shortfalls in tax revenues and additional expenditure arising automatically from the economic situation support the economy. Where there is room for manoeuvre, additional fiscal policy measures can be effective. They should be timely, targeted and temporary, and take account of the respective country-specific situation with regard to state finances. Notwithstanding all budgetary measures for supporting the economy in the short term, we need to ensure the sustainability of fiscal policy in the medium to long term. Public confidence in the soundness of state finances must not be undermined as this would also impair the effectiveness of the economic policy measures. Therefore, “exit strategies” from the current fiscal stimuli should be already thought of. Structural reforms Structural reforms in the countries of the euro area are very important for two reasons in particular. They are necessary in order to enhance the flexibility and resilience of the euro area economy and to increase its growth potential. Such structural reforms relate to the markets for goods and services, and the labour market. Reforms of the goods and service markets should strengthen competition and accelerate an effective restructuring. An example of successful reform is the telecommunications sector, where liberalisation has enhanced competition, increased the variety of products and lowered prices, to the benefit of consumers. Labour market reforms should have two goals: to promote appropriate wage-setting and to facilitate labour mobility – the mobility between sectors of the economy and between regions.

The business cycles of Morocco and the EU are largely synchronised and the existence of various economic transmission channels such as trade, tourism, and remittances, explain why both the European and Moroccan economies are going through a challenging period in the present global context. My speech today will focus on the global financial crisis and its roots, on the ECB’s response to the crisis and on the role of emerging market economies in the world economy. The global financial crisis and its roots Let me start by briefly highlighting the origins and evolution of the current crisis. Imagine a neutral observer who looked at the financial sector about a decade ago and then didn’t look at it again until the eve of the current financial crisis. He would have found a completely different financial industry, one which over the past decade has undergone a dramatic shift of focus. He would have discovered a financial system that had moved away from its traditional role of supporting trade and real investment. He would have found a financial system in which speculation and financial gambling had run rife. He would have encountered a system transformed – a system no longer managing genuine economic risks but one actually creating and assuming financial risks – risks resulting from arbitrage and intentional exposure to asset price changes. That same observer would have realised that financial liberalisation and innovation had made our economies more productive. The securitisation of assets, for example, had great potential to diversify economic risks and to manage them efficiently.