These arrangements must be in place before we conclude our assessment, in line with the declaration of the European Council of June 2013. It is also noteworthy that strong efforts to repair bank balance sheets and enhance transparency have already been undertaken in all euro area countries, especially in those that have experienced severe stress. As regards fiscal policies, substantial fiscal adjustment has been undertaken by the euro area countries over the last few years. The average fiscal position of the euro area countries is much stronger than that of global peers. The authorities should not unravel their multi-year efforts to cut deficits but should reduce the debt ratios without delay, in line with the EU’s fiscal framework, which has been considerably reinforced over the past few years. As part of this enhanced framework, the draft budgetary plans that countries will now deliver for the first time under the “two-pack” regulations need to provide for sufficiently far-reaching measures to achieve the fiscal targets in 2014. Euro area governments must also decisively strengthen their efforts to implement the needed structural reforms in product and labour markets. These reforms are required not only to help the respective countries to regain competitiveness and to rebalance within the euro area, but also to create more flexible and dynamic economies that will generate sustainable growth and employment. As regards intra-euro area imbalances, there has been a major external adjustment in euro area countries with previously high current account deficits.

We are very honoured to host the conference for this year and are pleased to welcome so many distinguished members of the legal fraternity, in particular, from other parts of the world to join us at this forum. My remarks today will focus on three key challenges confronting Central Banks, and how the legal aspects impact the effectiveness of Central Banks. The first relates to building the capacity to manage the increasing uncertainties generated by financial innovation, the increasing prominence of the non-regulated sector and the increasing interconnectedness between financial institutions and markets. Such developments have not only resulted in the emergence of new risks to the financial system but have also changed the dynamics of how risks in the financial system are transmitted to the real economy. In this environment, it is vital to have a legal and regulatory framework that is robust and dynamic enough to enable the central bank to respond to these developments. The second challenge concerns the effective implementation of financial safety nets and the effective coordination of the different components of the safety net to maintain public confidence and to support continuous financial intermediation. Appropriate legislation and regulations that ensure credibility and integrity of the safety nets are an essential part of maintaining financial stability. The third relates to the increasingly and highly complex financial and economic integration associated with globalisation. This has resulted in a significant expansion in cross-border financial activities and introduced new sources of risks to domestic financial systems.