Research has shown that undertaking coordinated reforms in  2  See R. Bouis and R. Duval (2011), Raising Potential Growth after the Crisis: A quantitative Assessment of the Potential Gains from Various Structural reforms in the OECD Area and Beyond, OECD Economic Department Working Papers No. 835, OECD Publishing. http://dx.doi.org/10.1787/5kgk9qj18s8n-en. Fast implementation refers to phasing-in over 5-years, while slow implementation refers to phasing-in over 10-years. 6  BIS central bankers’ speeches  all countries can boost GDP more than in a situation where each country acts alone.3 A more widespread approach to reforms in all euro area countries can therefore contribute to a stronger recovery in the stressed countries and in the euro area as a whole, through positive supply and demand effects. Conclusions Let me conclude. The euro area has come a long way in addressing its problems. The progress that has been made is remarkable and covers a wide range of areas and actors. The ECB has been central in stabilising the euro area economy, smoothing the adjustment process of the stressed countries and restoring the proper functioning of the monetary transmission channel. At the supra-national level, EU governance has been strengthened and, in particular, the Banking Union is being established. And at national level, progress is ongoing towards restoring fiscal soundness and driving forward structural reforms. The pay-off from these reforms is becoming increasingly visible: in 2013, we already saw signs of a turnaround in most euro area countries.

Between 2010 and 2013 Greece, Ireland, Portugal and Cyprus requested financial assistance from the EU and the IMF. These programmes involved far-reaching economic and financial policy adjustments. Other countries that had been hit by a confidence crisis, such as Spain and Italy, chose to undertake similar corrections. Spain also requested ESM programme for its financial sector. As a result, structural fiscal balances (i.e. fiscal balances excluding the impact of the cycle and one-off costs) improved significantly in all these countries. From 2010 to 2013 this improvement was equal to about 15 percentage points in Greece, 6.5 percentage points in Portugal, 6.0 percentage points in Spain, 5.5 percentage points in Ireland and 4.0 percentage points in Italy. Some of these adjustments are unparalleled in scale from a historical perspective. These fiscal corrections took place at a time when confidence had reached its lowest level, private sector saving ratios were sharply increasing, banks had to deleverage and access to finance by firms and households was impaired. The short-term costs in economic and social terms were therefore high. Yet, those costs were also elevated by the fact that most of the stressed countries had entered the crisis with rigid institutions and economic structures. As a consequence, the necessary adjustment of prices and costs to restore competitiveness was slow, which exacerbated the negative impact on activity. Nominal rigidities increased the real cost of the adjustment and the burden has often been borne by the more vulnerable members of society. A key complement to fiscal adjustment has therefore been structural reform.