be compared to a walking man, who has to stand firm on both legs. should one of the legs fail to respond in a timely and coordinated way for whatever reason, many adverse consequences would inevitably follow. although fiscal policy is of course extremely useful in many respects, i am quite skeptical as regards this specific feature that is so important for the elaboration of an appropriate policy mix, namely the stabilisation properties of an active fiscal policy geared towards macroeconomic fine - tuning. this “ leg ” seems quite unreliable to me, for several reasons. first of all, experience shows that fiscal impulses are frequently implemented too late, after the occurrence of the shock. these delays simply reflect a time - consuming decision - making process. let me draw your attention on the various steps involved : the identification of the problem, the elaboration of the required measures, the discussion of these measures and their political adoption, their implementation and the time it takes before they exert an impact on aggregate demand. there are many examples of allegedly contra - cyclical policies that turn out to exert a procyclical impact on the economy because of the time lags involved. in these circumstances, fiscal impulses could contribute to magnify economic cycles. in addition, long and variable delays increase the uncertainty about the impact of discretionary measures on the economy. this “ impact uncertainty ” will increase the uncertainty for economic agents and monetary policy - makers. furthermore, any stabilisation policy has to be conducted in a symmetrical way in order to avoid a systematic drift in the level of public expenditure. this condition is unfortunately difficult to fulfill, because many expenditure items are not flexible downwards. they could be increased in an easy way when the policy mix requires an expansionary fiscal policy, but a decline of the same magnitude will in all probability not be implemented when a restrictive stance becomes more appropriate. let me give the example of luxembourg to illustrate the validity of this point. the compensation of employees and social transfers - two expenditure categories characterised by a weak downward flexibility for evident reasons - jointly account for about 70 % of total general government expenditure. on a priori grounds, only the intermediate consumption of general government could be used in a symmetric way and in a timely manner, but this expenditure item does not account for more than 3 % of gdp. in addition, it is split between the central government and local governments, which would also require a close co - ordination between these two entities. the weak magnitude of fiscal multipliers

60 % of gdp, unless the ratio “ is sufficiently diminishing and approaching the reference value at a satisfactory pace ”. a third rule prohibits the monetary financing of the different subcomponents of the public sector and of community institutions or bodies. the treaty is supplemented by the stability and growth pact. the cornerstones of the pact are two council regulations adopted in 1997. under the pact, member states are expected to adhere to the medium - term objective of general government balances close to balance or in surplus. in order to establish this adherence, member states are required to present stability and convergence programmes each year. these programmes present inter alia the medium - term objectives for the budgetary balance and the adjustment path towards the “ close to surplus or in balance ” position. the ecofin council is required to deliver an opinion on each national programme, which gives way to “ peer pressure ”. in case of a failure to adhere to the treaty reference values, an “ excessive deficit procedure ” is in principle implemented. sanctions could be applied in case an excessive deficit is established. in my opinion, this framework is in no way an impediment to the smooth conduct and implementation of the single monetary policy. i would indeed argue that the aforementioned fiscal rules are clearly supportive of a stable monetary policy, for at least three reasons. - first, the prohibition of any monetary financing coupled with the high degree of independence of the ecb and the national central banks ensures that a potentially destabilising link between fiscal and monetary policy will no longer exists. a regime in which monetary financing is allowed is indeed characterised by a “ soft ” intertemporal budget constraint. in such a situation, the government may be tempted to resort to the inflation tax in order to finance budgetary deficits. the resulting situation could be “ mutually destructive ” for monetary and fiscal policy. in such a context, fiscal discipline could indeed degenerate into a loose fiscal policy, and the latter would in turn contaminate monetary policy. monetary policy would therefore become unpredictable and would increase the volatility of the monetary base and of the inflation rate. in the extreme case, this situation could lead to hyperinflation, as illustrated for instance by the situation of germany under the weimar republic. emu is congenitally immune from such episodes, owing to the prohibition of monetary financing and the independence of central banks in the euro area. - second, i am convinced that the fiscal rules embedded in the treaty and in the